If you take a look at the overall crypto market right now, things aren’t looking too good. Pretty much every major cryptocurrency you can think of has a very low price, and people don’t really know what’s going on. Are there actual reasons behind the current downswing in crypto prices? Or is it just a phase that the market is going to recover from? In this video, I’ll be taking a closer look at all of that to figure out why the market is down right now and when it could potentially recover.
The price of Bitcoin or any other cryptocurrency is based on market assumptions, just like stocks or any other asset of its kind. This means that the price of this asset can go up or down depending on how the market “feels” However, unlike stocks, there aren’t any market indicators that really influence the price of cryptocurrencies. There aren’t any sales figures or projections to go by, it’s all just speculation.
Cryptocurrencies aren’t really backed by any asset at all (in most cases). Whenever more and more people invest in a certain cryptocurrency, its supply is going to decrease, and as a result, its price is going to increase. The main reason people invest in cryptos is not to earn dividends or to have a long-term investment, but rather to earn short-term profit. Basically, you invest in a crypto that’s at $1, wait for the price to reach $2, and sell it for a profit. Of course, it’s a bit more complicated than that, but that’s just the gist of it.
However, there are external factors that can lead to an upswing or downswing in crypto prices across the board. It’s all related to demand. Demand for a cryptocurrency is the single most important thing that investors rely on. Back in early 2021, the crypto world saw one of its biggest increases in demand to date thanks to the likes of Elon Musk and Mark Cuban constantly promoting cryptocurrencies on their platforms.
Elon Musk, specifically, invested billions of dollars into Bitcoin, and he also announced that he would be accepting Bitcoin as a form of payment for Tesla vehicles. All of this led to a pandemonium of sorts in the crypto world. Suddenly, cryptocurrency became mainstream, it was rising fast, and everybody wanted their piece of the pie.
However, the honeymoon period didn’t last long. Later that same year, Elon Musk announced he would officially be banning Bitcoin as a payment method from Tesla and all of the other companies he owns. He also announced he would be selling all of the Bitcoin he and his company had previously bought. Why did he do that? The environment. Musk claims that Bitcoin and its entire “mining” process is horrible for the environment, which is why he banned it.
https://www.youtube.com/watch?v=hYF8xYqYYik&t
Regardless of whether or not Bitcoin - or any other crypto - is bad for the environment, the message to Bitcoin investors was clear - it’s time to sell. Suddenly, a lot of people lost their faith in Bitcoin, and a lot of people started selling fast. It led to one of the biggest crypto crashes in history. Bitcoin lost about 30-40% of its value, and other cryptocurrencies performed even worse. It was all-out chaos, and many people were worried that the market would never really recover. But it did. By November of 2021, almost every single cryptocurrency on the planet was reaching record peaks. Bitcoin itself hit an all-time high price of almost $67,000!
But that didn’t last long either. Eventually, by January of 2022, all of the major cryptocurrencies in the world had crashed once again. This time around, there was no clear reason as to why it crashed. It simply seemed like a case of a lot of people selling their crypto assets because they had a high value. In short, the crypto market crashed because people wanted to earn returns. This is always going to happen, no matter how far or advanced the crypto market gets. Every time there is a sharp rise in the price of cryptocurrencies, there is also going to be a subsequent crash in price.
This is exactly what happened recently as well. There was a general rise in the price of cryptocurrencies all across the board because of the Ukraine war. Many people believed that the Ukraine war and the subsequent sanctions on Russia would lead to an increase in demand for cryptocurrency, which is why the price started to rise rapidly. But eventually, people who invested while the price was still low started to sell off all of their crypto assets, which is why we saw the most recent “crash” in the crypto world.
This crash is likely going to last for a while now. It doesn’t really seem like the crypto industry is going to see an “event” that leads to an upswing anytime soon. World events usually lead to a massive upswing in crypto prices across the board. We saw the biggest rise in crypto ever during the peak months of the COVID-19 Pandemic, and we later saw another rise in crypto prices due to the Russia-Ukraine war. This is because people usually lose faith in “traditional” financial institutions during times of uncertainty, and crypto is usually the top option they look towards.
Now, there’s one thing to understand - crypto prices are extremely unpredictable. It’s almost impossible to predict where crypto prices are going to be tomorrow or a month from now. It’s not like stocks or real estate. There aren’t any legitimate “projections” for future crypto prices. However, if we do go by past precedent, you will start to notice a little pattern with the price of Bitcoin at least. Since the beginning of 2021, when Bitcoin saw an insane increase in value, it has seen many highs and many lows. But no matter how bad the market may seem, Bitcoin always seems to hit a bottom point of sorts when its price reaches $35,000 to $37,000. Whenever Bitcoin is in the middle of this exact price range, its price automatically starts to grow rapidly.
Now, why is that? Well, it has to do with the fact that Bitcoin is cheap for investors to buy. Investors already know how high Bitcoin can get, and whenever its price becomes very low, it becomes an extremely attractive asset for investors to get. That’s why when investors start to pour their money into Bitcoin to buy a “cheaper asset” the price of Bitcoin skyrockets. Whenever the price is high enough, investors eventually start selling their Bitcoin, causing its price to crash once again. It always bottoms out at around $36,000, but the most unpredictable part about all this is trying to figure out how high Bitcoin is truly going to get.
We can almost always predict where Bitcoin is going to bottom out, but its peaks have been rather confusing. Sometimes, it peaks at around 45k or 50k. Other times, it goes all the way up to 60k. Regardless of what the “peak” might be, this past precedent gives you a pretty good idea of how the price of Bitcoin really works. Of course, there’s still a very real chance that Bitcoin might crash even further, but it almost seems as if Bitcoin is too big to fail at this point. A low-priced Bitcoin is almost like an investor’s dream.
Another thing you should know is that Bitcoin’s price is very influential. To many people, Bitcoin is the only cryptocurrency they’ve ever even heard of. It’s usually the first crypto people invest in, and greater confidence in Bitcoin also means greater confidence in the crypto market in general. That’s why whenever the price of Bitcoin goes up or down, the overall crypto market usually follows suit. This obviously isn’t always the case, and the crypto market isn’t nearly as “linked together” as the stock market is. But it’s still something that has happened over and over again in the past, and it’ll probably continue to happen for the foreseeable future.
However, there’s a downside to that. Bitcoin is super outdated. Cryptos like Ether and Cardano are starting to look like much more attractive choices to crypto enthusiasts, which is why enthusiasts are more likely to invest in other cryptocurrencies. But at the same time, Bitcoin is still the “standard” cryptocurrency for anyone outside of the crypto-sphere. Bitcoin slowly losing its status means that it’s not as likely to rise in price, and it creates an overall negative perception of the crypto market as a whole for outsiders.
That might be a big reason why the crypto market as a whole is down right now. However, this likely won’t last for a very long time. There are going to be a lot of people who try to take advantage of the low prices and actually invest in crypto, while at the same time, Bitcoin is likely going to be replaced by some other cryptocurrency as the unofficial “king” of the crypto world. With the kind of advancements Ethereum is making, it will probably take over Bitcoin by the end of this year or during the start of the next year. It’ll be a while before the overall public perception of crypto changes over from Bitcoin to Ether, but it’s inevitable at this point.
Do you think the crypto market will eventually recover? Or will it continue to fall/stagnate? Let me know in the comments below!