Crypto Crashing; For the past few years now, most people have heard of cryptocurrency, even though they have not tried investing in this. Now, the price of cryptocurrencies is dropping, do you think is it time to invest?
I don’t even know what cryptocurrency is, you are not left behind. In this article, you will know what Cryptocurrency is and why it seems to be crashing.
What is Cryptocurrency?
Cryptocurrency is a decentralized digital currency, used to verify the transfer of money and secure transactions without third-party intermediaries. It is a digital asset that can be used for online purchases and investments.
Lack of Centralization
Crypto functions on a decentralized ledger called blockchain technology. It does not need a middleman or intermediary, which makes it unique and different compared to several financial organizations. Hence, the government is not in control of cryptocurrency.
Blockchain is like an online ledger or open checkbook, that records transactions in code. Each block contains a set of transactions that are verified by the member of the network. Every crypto participant has a record of all the transactions.
Examples of cryptocurrency include Bitcoin, Bitcoin is the most popular cryptocurrency and it is the first, launched in 2008. Other cryptocurrencies include Ethereum, Tezos, Dogecoin, Binance USD (BUSD), EOS, and Zcash.
Benefits and Risks of Investing in Cryptocurrency
Cryptocurrency, like every other investment, has its benefits and risks. But, it offers investors benefits that they can not get in the stock market. Let’s check out the benefit and risks of cryptocurrency.
Benefits
- The transactions are anonymous and very transparent, which most people want when it comes to handling purchases.
- It is convenient to own and transfer between parties
- Blockchain projects have evolved and are now generally used for everything from e-commerce payments to traditional banking. The crypto value has increased.
- Low transaction cost
- It is secure and private
- Decentralized
- It protects from inflation
- Self-governed and managed
Risks
- Due to the fact, crypto is virtual, you do not have a physical option, it is not centralized. Hence, it is endangered to cyber theft and data loss can occur
- The accounts are not insured by the Federal Deposit Insurance Corporation like the U.S. dollar is by banks.
- In recent years, there have been
wild price swings and volatility.
How To Invest in Cryptocurrency
To invest in cryptocurrency is not difficult. When you invest directly, it allows you to buy a cryptocurrency and chooses when to sell it and hoard it. It also does the following:
- Enables investors to maximize returns
- Offers investors opportunities to learn how to invest on the fly
- Investors have full control over their crypto purchase
- Investors get to decide how much they want to invest.
If you want to make a direct investment, you can buy bitcoin via PayPal payment.
Step-By-Step Guide
- Select a currency
- Pick your digital wallet. You can opt for an app that stays on your smartphone to a hardware-based wallet, which is an external hard drive for your computer used for only crypto.
- Choose an exchange where you can buy the crypto you prefer
Why Is Cryptocurrency Crashing?
There are a lot of things that are causing the crash of cryptocurrency, which include fear, rising interest rates, high inflation, and loss of confidence.
However, according to analysts, most of the factors are macro, which means the flaws are with the economy generally, not just the crypto market.
Recently, Bill Barhydt, chief executive at crypto financial service provider Abra, says to MarketWatch.com in an interview, “We have extreme fear in the markets right now. The market has priced in several rate hikes plus they’ve started to price in a severe recession…we’re in complete risk-off mode for all assets, just in the same way we were in risk-on mode,”
Also recently, Crypto lending platform Celsius Networks LLC suspended all transfers, withdrawals, and swaps between accounts “due to extreme market conditions.” This has added to the fear of investors.
There was a report of an investor, Jacob Willette, 40 years of age, a delivery driver, who put all his life savings in an account with Celsius. According to New York Times, When the platform froze more than $8 billion in assets, there was no guarantee that Willette’s money is safe.
Coinbase Took a Loss in Q1 2022
Coinbase, a well-known tracking, and the trading platform was reported by CBSNews.com of taken over a $430 million loss in the first quarter of 2022 and the company’s stock fell to 81%. It was declared that the company plans to lay off one-fifth of its staff.
However, Coinbase has overcome other crypto winters and some analysts aren’t worried about its future. According to John Todaro, a crypto-asset researcher for Needham & Co, “The winter would have to get progressively worse for Coinbase to be in any real danger,”.
The crypto crash is not just about crypto. The Dow Jones Industrial Average, a key stock index, joined a bear market in mid-June 2022. In early July, the S&P 500 officially joined a bear market. The crypto crash is occurring across the industry, beyond the losses investors are facing.
Is the Crypto Market Crashing?
Before thinking about the future of crypto, let’s check out the reason for the recent crash in the market.
According to Coinbase.com figures, in early July 2022, Bitcoin was 68.33% below its all-time high of $68,789.63. Bitcoin is a bear market, a bear market means investments reaching 20% below their peak for a long time. Other cryptocurrencies, tend to follow the same route as Bitcoin. Hence, let’s look at Bitcoin as a pointer to the general market.
In the first week of July, Bitcoin rose to over 15% and it was thought that the price will be stable around the $20,000 mark for a minimum of six months, according to CoinTelegraph.com.
Another bearish run, was said, could put Bitcoin between $14,000 and $16,000. Likewise, Ethereum rose close to 5% between July 6 and July 7. It is yet to recover from the loss and stays below its all-time high of $4,800 in late 2019.
Will Crypto Survive a Crash?
This is a crucial question. Knowing fully well the stock market has experienced several ups and downs in the past keeps the investor’s mind at peace.
Crypto has scaled through several crashes in a short period. There have been a minimum of seven significant Bitcoin crashes and recoveries.
In 2011, crypto experience winter, and lost 99% of its value. According to TheGuardian.com, “winter comes before spring,” and investors may just have to sit this one out and “wait for the market to thaw,” so to speak. With the recent crash plus the impending recession, investors are reluctant to invest in crypto.
On the other hand, many Wall Street investors are shorting. But, with crypto, it is worth hanging on. Beincrypto.com wrote, “In history, 100% of the people who have bought and waited 4 years or more have seen their investment grow.”
FREQUENTLY ASKED QUESTIONS
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Why is cryptocurrency crashing?
Many factors are involved in the crash of crypto, which includes macroeconomic issues like rising interest rates, falling stock prices, inflation, and a recession. At the same time, crypto’s relatively short history in the world of finance is making some investors feel insecure about cryptocurrency.
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Is the crypto market crashing?
Bitcoin is down close to 70% from its all-time high. By accepted metrics, a bear market happens when assets decline at a minimum of 20% from their record high, that is the crypto market is crashing right now.
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Will crypto survive a crash?
Crypto has experienced crypto winter before. In general, over time, financial markets tend to rise. Looking at historical precedents, cryptocurrency and its infrastructure is not likely to disappear.