Cryptocurrency crash – introduction
The cryptocurrency market is relatively new when compared to other assets, considering that Bitcoin’s first trades date back more than a decade and only in recent years large institutional investors begun to acquire cryptocurrencies, injecting billions into that market.
Under such conditions, naturally we have substantial variations in asset prices, fluctuating down and up, as Bitcoin’s behavior has demonstrated.
However, after a series of adverse events – such as the threat of cryptoassets taxation by the US government and the shutdown of one of the main Bitcoin mining hubs in China, due to a temporary power outage in early April – caused prices to decrease more than 20%.
It didn’t take long for hasty analysts to enact the cryptocurrency crash, as they have done at other times, such as the beginning of the pandemic in 2020.
However, in this and other adverse moments, this type of asset demonstrated its ability to recover, with new series of valuations.
In this article, we will delve into this discussion to explain why a cryptocurrency crash is unlikely to happen. Read on and learn more.
Bitcoin broke the record of valuation after successive falls
As we were saying, cryptocurrencies such as Bitcoin experienced record highs after periods of devaluation. The recent case cited, which led to a fall of more than 20% in the value of Bitcoin, is just one among several.
In early 2018, for example, the currency was being trade for about $20,000. A few months later, in March, the price reached half of this value, and stabilized close to this level until 2019.
Between 2020 and 2021, Bitcoin experienced a record valuation. After successive increases, the currency was traded at over $68,000, representing a 340% increase over the beginning of 2018.
This means that, in a short time, Bitcoin has experienced successive falls, but has shown great ability to recover by zeroing out its losses.
Large institutional investors have already acquired billions in cryptocurrencies
An ever-present question when discussing cryptocurrency investment was: when will institutional investors start investing in these assets?
Recently, this question has been answered. U.S. company Tesla alone acquired $1.5 billion in Bitcoin, a move accompanied by other giants such as PayPal and investment funds from large banks.
For those who do not know, institutional investors are managers of large funds responsible for decisions about capital allocation involving billion-dollar figures. In the financial market, these agents are called “big players” precisely due to their ability to influence prices according to the capital they hold.
Cryptocurrency investment by these agents is not by chance and removes the idea of a possible cryptocurrency crash, to the extent that this bulky investment assumes that this market is increasingly consolidated. In addition, although these assets have high volatility, they are expected to valuate in the long run.
Remember, for example, that anyone who acquired a dozen units of Bitcoin in the early 2010s, investing only a few hundred dollars, today may be a millionaire if he/she have hold their Bitcoins.
The popularization of cryptocurrencies is a point of no return
The value proposition of cryptocurrencies to the economy is already more than demonstrated, as shown by the people’s growing acceptance of trading with cryptocurrencies such as Bitcoin and Ethereum.
Besides, we have an increasing number of investors buying cryptocurrencies as a way of protecting themselves from inflation and price instability in their respective countries.
Each year, this acceptance continues to grow, leading to a continuous increase in the volume of trades, showing trust on the part of more and more people in buying these digital assets, who have come to stay.
Cryptocurrency crash – conclusion
The cryptocurrency market, although recent, has grown consistently since its inception. Bitcoin, the pioneering cryptocurrency, has a market value of over 1,2 trillion dollars, with an increasing volume of trades.
That said, it is increasingly difficult to see the existence of a cryptocurrency crash, considering the degree of acceptance by an increasing number of people, as well as the potential for long-term use.
It is important to understand that price fluctuations are normal movements within variable income markets, and the cryptoasset market is also subject to fluctuations.
However, it is essential to see beyond the negotiated prices and evaluate the value of each cryptocurrency to the ecosystem, and to society in general.
Investing wisely is to calmly evaluate the available assets and understand that projects that add value to people may have short-term price corrections, but in the long run they tend to be interesting opportunities within the world of investments.
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