Bitcoin and other cryptocurrencies are experiencing massive losses and fewer trading volumes due to the recent crypto crash. Volatility and regulatory issues are causing investors to retreat from crypto, causing the price to fall even further. What’s behind the crypto crash? A range of factors are contributing to the crash, including bad press, government pressure, and public influence. China, for example, shut down Bitcoin mining operations in May 2021.
The cryptocurrency market is known for its high volatility, which many new investors fear. To avoid such risk, it is important to know why crypto goes up and down. It also helps to understand how the volatility affects your portfolio. Volatility is a regular up-and-down movement in an asset’s value. It is measured by comparing the current price to the asset’s average up-and-down trend line.
The stock market experiences volatility all the time, and the same thing can happen with the crypto market. While massive retracements are feared by most investors, seasoned investors often view them as buying opportunities. Fortunately, crypto experts say it is better to get used to volatility. Bitcoin’s recent volatility is a result of several factors. China’s crackdown on crypto transactions and Tesla’s decision to stop accepting bitcoin are just a few of the reasons for the recent swoon. Elon Musk’s tweets on the subject also contributed to the overall volatility.
There are two sides to the story of regulation in the cryptocurrency world. On one side, regulators and industry players alike are concerned about how regulators are treating the technology. The biggest question is who is going to bear the burden of regulating crypto. Regulators have a lot of work ahead of them. They have to understand what differentiates crypto from other products and tech platforms. The industry is growing at a rapid pace and regulators must recognize this.
The answer is complex and depends on the circumstances. The United States federal government could outlaw crypto ownership, which would significantly lower its value. But the price of crypto will still continue to correlate with the price of other traditional assets. If the government did outlaw cryptocurrency, the money would move offshore and the value would drop drastically. This is why investors must pay close attention to the financial markets. Ultimately, they have to make the decision based on their ability to handle volatility.
Supply and demand
The current crypto sell-off may have many causes, but a common theme seems to be high inflation. The Consumer Price Index is at its highest level since 1982. The US economy isn’t experiencing stagnant growth, but global supply chains are struggling to keep up with demand. This may also be contributing to the sell-off, as miners and traders are trying to cash in on their profits. The sell-off could also have a domino effect, with prices in other markets following suit.
The price of Bitcoin Cash shot up 40 percent before the split, doubling the funds of many investors. After the hard fork, however, prices fell dramatically. The competition between SV and ABC may have inspired some uncertainty in the market. In addition to the underlying fundamentals, the market is still a young asset, and regulation is still in its infancy. Still, some experts say it’s not too late to invest in crypto.
Bitcoin’s decoupling from traditional economy
Many have wondered if the price of bitcoin is a cyclical phenomenon. This question is especially relevant now that bitcoin has already plummeted more than 16 percent this year, and even more so since last summer. However, the investment levels in crypto have continued to grow throughout this period. This decoupling may be related to investors’ disbelief in a prolonged bear market, and dry powder held by funds seeking to invest in this sector. This VC crypto craze coincides with the Nasdaq’s 21% decline. Additionally, the number of M&As involving crypto target companies is ballooning worldwide, as the hype from Web3 decentralized online utopias and metaverse virtual worlds has increased significantly.
A recent JPMorgan report shows that institutional investors have been moving away from bitcoin, and instead are turning back to traditional assets like gold. This weakness is not isolated to one crypto asset, but may be a sign of a wider rotation away from speculative trades. In the aftermath of the coronavirus pandemic, growth and tech stocks outperformed the market.
Buying the dip
Buying the dip is an investment strategy that involves buying an asset when it is on a decline. It can be lucrative when an asset is in an uptrend, but more difficult in a secular downtrend. In either case, the average cost of owning a position is lower. Nonetheless, you should be constantly monitoring the market and evaluating the best time to buy. Read on for tips. Then, use these tips to make the most of the dips in your portfolio.
Buying the dip when crypto goes down is a common strategy used by many people to make a profit. The idea is simple: buy when prices are low and sell when they hit their high. Obviously, this strategy doesn’t work for all crypto, but it’s worth considering. While the concept is simple, you should also be prepared to sell if the price rises. Buying the dip is not a good idea for people who hate taking profits.