The cryptocurrency market continued to see red 📉 after the recent sell-off. Bitcoin dropped almost 70% from its all-time high of $69,000 in mid-November, while the overall cryptocurrency market cap shed approximately $1.9 trillion. However, prices are showing signs of recovery. The total market cap has tanked below 1 trillion, with bitcoin accounting for almost half of the value. The recent price fall also makes investing in cryptocurrencies cheaper for new investors looking to enter the market. As Warren Buffett says: "Be fearful when others are greedy and greedy when others are fearful." Here is a brief analysis of what led to this correction and what we expect going forward.
What's Caused The Recent Correction?
The most obvious trigger for the recent sell-off was the bear market downtrends and inflation, plus the announcement from the Securities Exchange Commission that it would be reviewing whether the trading of cryptocurrencies should be regulated as securities. The theory is that if the SEC were to decide that cryptocurrencies are securities, then it would have the power to end the current Wild West approach towards the sector and impose stricter rules related to financial disclosure, company governance, and investor protection. If the SEC decides that cryptocurrencies are not securities, they would likely attract more institutional investors, which would likely lead to another leg higher in prices. Another reason for the recent correction was the increasing number of bans on the advertising of cryptocurrency-related products on social media, such as Meta (Facebook) and Google. Together, the two companies account for almost half of the online ad market, meaning that this ban significantly reduced the number of people who would be exposed to information about cryptocurrencies. It is also not unlikely that the anticipation of stricter regulations in Asia, such as the expected Chinese cryptocurrency ban, contributed to the overall price reduction.
Why Did the Cryptocurrency Market Fall?
The cryptocurrency market fell because there was a significant reduction in trading volume across exchanges worldwide, which led to a reduction in the demand for cryptocurrencies. Although the market has seen growth in the number of people interested in investing in the asset class, the market capitalization has fallen by almost $1.9 trillion, indicating that more investors have sold their tokens than people have bought them. The fall in the cryptocurrency market is also likely due to the sudden increase in the price of cryptocurrencies in 2021 was largely due to speculation and hype. There was an expectation that the price of cryptocurrencies would decrease more, which led to a lot of people buying cryptocurrencies in the hope of making a quick profit. However, when the price of cryptocurrencies fell, there were significantly fewer people looking to buy cryptocurrencies with the expectation of seeing the price increase. People are too afraid to catch the falling knife.
Where Do We Go From Here?
The cryptocurrency market is still very young, and most listed cryptocurrencies are not yet matured. With that said, the market is still in its very early stages of development, and it is unlikely that we will see the same type of correction that we saw in 2018 again in the short term. That being said, there is still a considerable amount of risk in the cryptocurrency market, as there is a significant chance that regulations will end up being more strict. But, there are also a number of upcoming new crypto projects that are worth looking out for if you're interested in investing in the cryptocurrency market. In addition, a number of decentralized applications and protocols are expected to launch their products in the second half of the year, which may help the market recover from the recent correction while the Web2 companies are entering into a slower growth pace to slowly recover from their valuation lost in the first quarter of 2022. It indicates that crypto may lead the new phase of technology growth while the fiat currency with debts will drag the speed of recovery in the coming decades.
Recommended New Era of Crypto
After the current bear market, there are many projects dipped into trouble from Luna, Celsius, Three Arrows Capital, and possibly more to come. However, the business cycle of crypto evolves faster, with potential more growth to come. If tech companies are having trouble growing, crypto will spearhead the development to lead the industry to move forward. The growth opportunities are unlimited.
What will follow after the correction
If the recent sell-off continues and the price of all cryptocurrencies falls below their previous low price, it may indicate that the market has reached a bottom with oversold volume. If the market does recover, it will likely be a long-term recovery that will see the market slowly increase in value over a period of several years. If the price of cryptocurrencies increases significantly, it may lead to governments around the world imposing stricter regulations on the sector, which could result in a significant correction in the value of cryptocurrencies. But either way, crypto will lead the market's recovery faster than a fiat currency in the next decade.
Of course, I NOT tell you to invest everything and to promise the future. It is a way of my perspective of the future.
We need people like Peter Schiff to criticize crypto to make it a better space!