Crypto's not dead: how traders beat the bears
Cryptocurrency prices are caught in a bearish downturn, with the collapse of Terra Luna (UST) being the standout event that had critics of all things crypto calling for blood. Although the drama of the current situation has led to some prematurely declaring the end of crypto, those with cooler heads have pointed to signs of long-term resilience in the market.
For anyone who has been in the crypto scene for more than a few years, it might feel like deja vu. After all, the last big crypto 'crash' came in March 2020, when Bitcoin (BTC) dipped to around $6K. But anyone who bought the dip back then would have had plenty of opportunities to make a huge profit, especially if they had held on until the end of 2021 and sold at $68K. Even if they sold now, they would still make five times their initial investment.
Several prominent analysts have pointed out parallels between the ongoing crypto crash and March 2020. Anthony 'Pomp' Pompliano, podcaster and author of The Pomp Letter and a perpetual Bitcoin bull, highlighted in a tweet that "Bitcoin is up 340%" since March 2020. For new crypto traders who got into the market more recently, this could simply be the shock they have to suffer as a test of resilience before prices rise again, just as they did after 2020.
Crypto and stock market trends
In spring 2020, just as now, the crypto bear market came along with a wider downturn in the general stock market. At the time, this was caused by fears of supply chain disruptions and an economic slump due to the impact of the rapidly-spreading COVID-19 pandemic. Those fears led to panic selling and the devaluation of a range of assets, but Bitcoin and the wider cryptocurrency market would go on to bounce back with a vengeance, reaching unprecedented new heights in just over a year. Far from being divorced from conventional financial markets, cryptocurrency still seems tied to it, especially tech. On a potentially positive note for crypto's future, the S&P 500 also recorded a 2% rise after hitting a 52-week low, just as it did back in March 2020.
Nonetheless, the market situation is different from the panic induced by a global pandemic. Inflation is fuelling current fears, but whatever the reason, the fact remains that the market does move in cycles, and cryptocurrency's volatility simply makes the ups and downs of price movements larger and more dramatic.
Crypto as a long-term investment
The fall of Terra Luna should be a lesson learned, but the two most popular cryptocurrencies, Bitcoin and Ethereum (ETH), still have strong fundamentals for long-term investments. BTC has been around a long time, is less complex and is less vulnerable to the kind of system failure that felled UST. Furthermore, its decentralised ownership structure (the top 10 holders control only 5.59% of the tokens in circulation) protects it from market manipulation by whales.
Ethereum, on the other hand, continues to innovate and act as a cornerstone of emerging technologies such as DeFi and NFTs. With the upcoming 'merge', Ethereum will upgrade to a proof-of-stake consensus model, making it energy-efficient, scalable and an even more attractive platform for new projects and investors. Altcoins may come and go in market upheavals, but the upper echelon of crypto is here to stay.
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Experienced crypto traders know that a bear market still offers plenty of opportunities to make money trading. For example, they can engage in short trading to profit when prices are falling or buy the dip and hodl on until the next time prices rise to new heights. Some traders bought up cheap Bitcoin in March 2020 and sold it during the winter of 2021-2022.
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