The Future of Crypto: Crash or Comeback?
The crypotocurrency market has been in a prolonged downturn, with some experts predicting a continuing sideways trajectory until mid-April 2024, due to the upcoming halving event. As history has shown, the market trends towards an all-time high (ATH) after each halving, but the near future looks uncertain.
The Outlook for Cryptocurrencies
I believe that most cryptocurrencies are likely to fail in the short term, either due to being scams or from poor business models. The recent FTX fiasco and regulatory pressures may cause many crypto businesses to fail, resulting in a severe decline in the value of their tokens.
In contrast, a minority of cryptocurrencies, particularly Bitcoin, will withstand the crisis and even thrive. In the long term, as people realize the impending transition to a dystopian Central Bank Digital Currency (CBDC) future, Bitcoin is positioned to take center stage.
The Current Market Trajectory
The current market downturn is not unexpected. Rising inflation, interest rate hikes, and geopolitical instability have all contributed to the current situation. Specifically, the Ukraine war has created a volatile environment for the crypto market.
The crypto market experienced a massive crash, with $200 billion in value erased within a 24-hour period. Bitcoin, which accounts for around 44% of the crypto market, dropped to a 90-day low of $26,350. Although the value rebounded to $30,000 by the end of the week, it remained down by 15% for the week and over 56% from its November high of $69,000.
Why Investing in Cryptocurrencies Now is a Good Idea
Despite the current downturn, some experts and investors see this as an opportune time to invest. The long-term potential for cryptocurrency remains high, and focusing on stable and reliable service companies like CoinStore can mitigate the volatility of the crypto market. This service company offers substantial returns with less concern about price fluctuations.
The Influence of the Stock Market
The crypto market is heavily influenced by the overall stock market. When tech stocks are volatile, as happened late last week, cryptocurrencies like Bitcoin are affected. The Nasdaq, which plummeted on Monday and regressed further on Wednesday, recovered slightly on Friday.
Bitcoin, often seen as an inflation hedge, has also been affected by high inflation and tighter monetary policies. This shows that cryptocurrencies are becoming more mainstream and are subject to the same market conditions as other financial instruments.
The Erosion of Stablecoins
The recent events in the crypto market, particularly the Terra collapse, have highlighted the instability of decentralized algorithm stablecoins. In March 2022, Terra’s creator, Luna Foundation Guard LFG, added Bitcoin to its reserve as a stabilizing measure. However, this did not prevent the collapse of UST, the largest stablecoin, which temporarily dropped below $1.
The collapse of TerraUSD and other stablecoins like USDT has underscored the fragility of the decentralized stablecoin model. Centralized stablecoins, such as USDT, while criticized for insufficient funds, are better equipped to withstand crises.
The Bottom Line
The crypto crash has taught many valuable lessons. While top altcoins like Terra can suffer significant losses, decentralized stablecoin models need better strategies. In the long run, however, I still see Bitcoin and the crypto market rising. The only question is when we will witness this upward trend.