Will Crypto Rise Again – And What To Do In The meantime

Since 2020, the crypto market has experienced the biggest bear season in its history (coindesk), with the harshest wave persisting throughout 2022. From an all-time high of nearly $69,000 in November 2021, bitcoin is now trading at around $20,000. And that's only because he's made some recent gains. For weeks, the price hovered below this mark. The same goes for Ethereum, dropping from an all-time high near $5,000 to around $1,500 now. The story is even worse for altcoins as well as NFTs, the price of which is mostly expressed in cryptocurrency.

$2.2 trillion. This was the global cryptocurrency market cap at the start of 2022. Twelve months later, the market cap is around $1 trillion.

This prolonged bear run has resurrected questions about whether the whole crypto craze is a bubble after all. Yet the industry's particular challenges do not justify an uncritical dismissal.

To understand the current decline in crypto, it is important to explore all the past ways the market has fallen, one starting between 2020 and 2021 after a relatively strong 2019. It all started with COVID-19, you might say, but the continued uncertainty of the past few months has highlighted the question of the viability of the crypto economy amid various global incidents and critical market variables.

Like every major downturn before this one, the latest crypto market crash is due to several factors. On the one hand, there is the challenge of high inflation, which the Federal Reserve has failed to stem, despite rising interest rates. The last increase, to 3.9%, was on November 3, and experts predict the rate could reach 5% by March 2023. Many retail investors who have come to believe in crypto as a hedge against inflation accept how crypto behavior is similar to traditional asset classes, especially stocks.

On the other hand, the recent escalation of the Russian-Ukrainian conflict has been a brutal new dimension of geopolitical tension in Europe that has destabilized the market. Beyond that, the war also revealed how vulnerable cryptocurrencies are to government regulation.

By creating bitcoin, Satoshi Nakamoto had hoped to fight against the monetary control of governments and traditional financial institutions. And indeed, one of the popular uses of cryptography has been to circumvent government restrictions.

However, this has all failed for Russian crypto holders, who have seen their ability to transact crypto restricted since the EU began hitting the country with sanctions. This eroded much of the public trust in crypto and as such contributed to it being valued less.

Nevertheless, some important reasons for the decline are not systemic at all. For example, incidents like the implosion of the Terra and LUNA ecosystem and the liquidation of Three Arrows Capital (3AC) are directly linked to declining investor confidence in the crypto market.

Furthermore, in the face of these specific challenges at this time, the crypto market faces general hurdles that keep the assets highly volatile, even though one might think the market is already maturing. The simple reason is that cryptocurrencies are highly speculative assets by design and therefore structured for price fluctuations. But due to the high risks they entail, cryptocurrencies also face the continuing threats of (sometimes oddly strict) regulations, and lack of clarity at all levels, less regularity, remains a scourge on growth.

Additionally, it should be noted that whales manipulate market prices significantly. Therefore, the fact that many whales dumped their BTC this year can be felt in the broader market and especially in altcoins. In July, one of the richest whales even dumped a total of 78,484 BTC, worth $1,400,000,000 at the time.

In the midst of these sad stories, a glimmer of hope appears. For a market historically known to be highly volatile, BTC has shown some stability over the past few months in terms of price range and global market cap, which sits between $800 billion and $1.2 trillion. dollars since June. More so, bitcoin, in particular, has performed rather well than assets such as stocks, gold, and even currencies such as the euro and the pound.

Despite this resilience and a brief gain recently (eventually breaking the $20,000 mark), what...