Cryptocurrency has been one of the most glorious and talked-about investment instruments among experienced wealth investors to generation Z. For the last many years, it has been multiplying the wealth of investors. But the recent smash of cryptocoins forced the investors to question the long term future of the crypto market. Is crypto a scam that would wipe out the hard earned money of the investors? Or they are going to stay here! We will argue why cryptos have sustainable future and growth prospects. How the pending international regulations can affect the crypto market further?
The disappointment is apparent with a 70% downfall of Bitcoin and a whopping decrease of 79% of Ethereum. According to a survey, CoinGoLive 98.8% of cryptocurrencies have already lost more than 90% of their peak value. More than $2 trillion has been wiped out from the crypto market.
Why is the crypto market volatile?
There are macro economic indicators behind the recent sudden crash of the crypto market. Inflation is rising tremendously worldwide. Russia-Ukraine war aggravating the situation by pumping the prices of food and fuels. Supply chains are disturbed. Hence, Countries are facing multi-year high inflation rates. Consequently, central banks are increasing the interest rates to absorb the extra liquidity from the economies. For this reason investors are pulling out the money from the crypto markets. As it is the general tendency that people pull out investments from the most risky assets in time of economic unrest and insecurity of jobs and businesses.
Market crash deepened with the declared bankruptcy and insolvency of major crypto finance firms like Celsius Network, Voyager Digital and Three Arrows Capital.
Nature of cryptocurrencies is volatile. There is huge uncertainty for each crypto coin. Nobody can tell exactly which crypto technology is going to be the most useful in the long run. Likewise, a lot of technological applications are unproven. There might be some applications that the market would respond to while some might be obsolete.
There is a lot of uncertainty attached to this new asset class. So, people pull out their investment from the riskier investments in times of financial market downturn.
Fear of pending recession is deepening this investment pull from the crypto market and creating a crypto crash.
Besides, governments are also sceptical about the misuse of cryptocurrencies by the terrorists and medium as a black money. Subsequently, governements and regultory bodies can bring suppressive laws and regulations to control adn regulate the whole gamut of crypto assets. needless to say that such regulations can hamper the free flow of cryptos and can mean the devaluation of many of the crypto coins and technologies in future.
Does this mean crypto markets are going to wipe out completely?
Crypto enthusiast, Investor and billionaire Mark Cuban says that not all cryptocurrencies will be affected equally. He believes that cryptos that have real value, underlying disruptive technology and sound business would survive the tough time. Only the fittest of all will survive the crash. Crypto coins that do not have real world application or innovative technological use are going to lose their value and will likely be not able to recover from the downfall ever.
This is not the first time that crypto markets are facing such a crash. They have witnessed such a meltdown three times in the past. After all it’s a business cycle that would surely go up and down as well. This period of extreme uncertainty in the crypto market proves again that a well-analysed plan, diversified approach and healthy risk management can always save the investors from huge losses and sudden fall.
What’s Next for Digital Currencies?
Digital currencies have potential to become a widely accepted medium of exchange for goods and services.
Businesses can realise the real technological value through entrepreneurship.
Undoubtedly, this disruptive time can bring in new business models, more resilient infrastructure solutions, and more innovative and useful crypto products. Crucial thing to see is which business models, technologies and solutions are going to emerge victorious from this “bear” market phase.
Crypto markets need better and more secure system for consumers protection from theft, scammers, and fly by night currency operators. There is a high need to protect investors, especially the amateur retail investors.
More transparency is an absolute need. Technology needs to be transparent for the customers to better understand each and every nuances of the company and its crypto products. This problem of lack of transparency is common to most of the crypto assets. Companies are recognizing this underlying issue and trying to solve this.
Informed investment decisions are necessary for the investors and the overall market sustainability.