Cryptocurrencies, including the reputable Bitcoin, have been experiencing a slump in the stock market and other investments. Crypto experts are calling this bear market for cryptocurrency a crypto winter. But like a bear market for stocks that keeps recovering, will this crypto winter end?
How bad is the cryptocurrency crash?
According to Coinbase, Between July 2021 and July 2022, Bitcoin has fallen by about 24%. The current value of Bitcoin is $21,070.10 per coin as of July 26, roughly 33% less than its price in December 2021 of $64,912.20. Similarly, Ethereum is down more than 13% from this time last year, and it has lost more than 32% of its value since its peak. Altcoins usually tend to follow the pricing trends of Bitcoin, and according to Forbes Advisor, the global crypto market has dropped about 60% since November of last year.
However, following the same tracks as the stock market, which saw some modest gains in July, crypto is also creeping up at a decent pace. Coinbase said Bitcoin showed a 21% increase in the second week of July. But that does not necessarily mean that the crypto crash is over. But, let us first consider whether the crypto market will be able to survive the recent crash.
Will the crypto market survive the crash?
When the cryptocurrency market was declining, Terra was supposed to stay put as it was a stablecoin, i.e., its value is tied to the value of the US dollar. Ironically, Terra dropped from more than $50 billion to virtually worthless in one week. Following this, other stablecoins also began to lose value. Soon after, Bitcoin started to drop as well. While the failure of Terra was one of the catalyzing factors, other economic factors, including rising interest rates and inflation, also contributed to the crypto crash.
Crypto experts say that many coins will cease to exist at the end of the latest crypto winter. For example, many penny cryptos, which are highly volatile investments, may crash with no hope of revival whatsoever. However, the blue-chip cryptocurrencies, which include Bitcoin, are more likely to survive the current cryptocurrency market crash. Regardless of price, cryptocurrencies in the top 500 by market cap are more likely to give positive returns over time.
Cryptocurrency’s viability is also tied to the technology that powers it, i.e., blockchain. With the growth of the metaverse, especially NFTs and NFT gaming, the technology behind cryptocurrency seems more prevalent and promising than ever. The underlying features of blockchain technology represent huge improvements for commerce as businesses worldwide using the tech will be able to operate much cheaper and faster with greater transparency and security.
Is the Crypto Market Recovering?
The industry has seen a recent rise of crypto in mid-July and other positive economic indicators that indicate a slow turning of the bear market. These changes may perhaps be indicating a cryptocurrency market recovery over the horizon. And it may even happen faster than many experts believe it would occur.
There was an unexpected boost in retail spending in June 2022 in the US. Also, the US Federal Reserve projected an interest rate hike of just 0.75% rather than a whole point. These factors have bode well for the US economy. And since the crypto crash is related to these kinds of macroeconomic factors related to countries like the US, crypto could, in fact, be in the early stages of recovering already.
There have been instances where the cryptocurrency market has bounced back before. And if the stock market is referenced as an example, it is likely that the crypto market will survive and rebound again soon. However, will crypto ever go back up to its 2021 record highs? Some experts believe not only will crypto bounce back up but that Bitcoin could surpass $100,000.
Investors should stick to coins with a known reputation and a high market cap, such as Bitcoin, to increase the odds of investment success.