The cryptocurrencies have experienced a massive drop these past few months, a rough start to the crypto world. This downtrend has brought speculations and even a loss of confidence on how crypto traders can protect their assets. Aside from the cryptocurrency crash, there’s a growing public opinion crisis and endless arguments that cryptocurrency has no value, negatively impacting newbie’s and future investors.
Why are the crypto prices still continuously tumbling? The truth is, there’s no viable solution to resolve it, but there are certainly a handful of reasons behind it. Know the reasons for the cryptocurrency crash and how crypto traders go about it.
Reasons for the Cryptocurrency Crash
- Investors Seeking Safer Ground
It can’t be avoided that investors are turned off by what’s going on in the global crypto market. With this, many are moving their assets back to dollars. The highest recorded crypto liquidations are recorded in the first and second quarters of 2022. And this trend is projected to continue until the end of the year.
Another reason why investors turned skeptical about cryptocurrency is that crypto lenders and even Bitcoin decided to freeze withdrawals for a few hours. They fear that it’s possible for their digital assets to be withheld for a longer period or, worse, be gone forever. The ongoing conflict between Ukraine and Russia also affects the price of the cryptocurrency because, in this geopolitical uncertainty, investors tend to shy away from risky assets.
- The Pandemic-Era Effect
During the pandemic, a lot of people were enticed to invest the money that they couldn’t spend on leisure and for other things in the stock market and cryptocurrencies. Just after a year, lockdowns are easing, and the world is towards normalcy which now gives people more options on how to spend their money.
The pandemic-era effect took place in the first months of 2022 when cryptocurrencies are in tight competition to keep people investing, but since assets are largely accessible, and there are now more options for people to invest in other markets, the demand decreased due to limited crypto cash flow.
- Falling Equity Market
This may not be supported by crypto novices, but there is proof of a direct correlation between the crypto and stock markets. If the stock market is down, expect the crypto market reflects the downtrend in real-time. It’s said that the tightening monetary policy of the US Federal Reserve is the one to blame for the recent crash.
Overall, the stability of the equity market depends on supply and demand, economic conditions, geopolitics, regulatory changes, stock issuer financial health, and monetary policy. Aside from these, another possible reason between the two entities is because the cryptocurrency emulates the stock market price since it’s still in the discovery phase.
What Should Crypto Traders Do?
When the cryptocurrency prices are down, traders and investors take this chance to increase their buying activity, but is the “buy the dip” a recommended strategy? The buy the dip strategy is the principle that the price drops will not last long, and it will recoup anytime soon. However, since cryptocurrency is highly volatile, no one can tell if this downfall is a long-term trend.
The cryptocurrency crash right now doubles the buying risks. The digital currency is not the only entity affected, but everything is down due to inflation, war, and recession. Experts advise that the sharp market swing does not have guarantees of return. Those new to trading and investing must only put in the money they are willing to lose. Here are the ways how to face this challenge:
- Consider a long-term perspective
In this time of uncertainty, you may think of just selling your cryptocurrency, or if you are a risk taker, you may even think of buying a dip. Before making any move, you may want to check the reason why you first invested in this market. If you’re into a long-term opportunity, you would know that the crypto dip isn’t permanent; it’s all part of the market cycle. A solution to this before even investing is to not invest the money that you will need in the short term.
- Consider other blockchain technologies
With what’s happening in the crypto world right now, it is best for crypto traders to try out Alt Coins. One of the booming cryptocurrency alternatives is the Celadon Coin. The Celadon platform aims to give investors and traders equal chances of generating money through the Anti Whale Mechanism (AWM). The AWM ensures that no one can be able to buy large amounts of coins and then sell them later when the market is down.
CELA – the native token of Celadon addresses some of the issues crypto users face in the decentralized space. It will be a bridge between different blockchain so that tokens are easily converted to other blockchain standards.
For those who are new to trading or investing, this newly devised cryptocurrency will help you make the most of your investment because your CELA tokens will be locked in a smart contract-driven staking where profit is an assurance without needing to sell them. They also have a way to reward loyal users through their referral program. Platform users will be rewarded with tokens for every successful referral.
The cryptocurrency crash is no longer new to the crypto world. This massive dip is an indication and even a reminder that such investments involve risks. As they say, down, put all your eggs in one basket. It would be a wise move to balance your investments and proportionately finance different ways to get income like in real estate, stocks, and other safer investment options.