The cryptocurrency market is currently experiencing one of its most significant declines yet. The market capitalization of the overall market has been slashed by almost in half, Bitcoin and Ethereum have lost significantly in terms of prices and their overall usability has fallen as a result. The slew of DeFi hacks and catastrophic failures at protocol levels, such as Terra Luna, have also contributed to the general downturn on the cryptocurrency market.
Such a state of events has led to the gradual migration of many investors from the space in search of safer havens for their capital and savings. Some have started reinvesting their crypto portfolios into commodities like gold, while others are taking on the wait and see approach, thinking that the market will eventually rebound. The recent Merge of the Ethereum network, which heralded its transition from the Proof-of-Work to the proof of stake approach did little to stem the tide of depreciation, as evidenced by the recent statistics. The network lost almost 18% in market capitalization after the Merge, showcasing that the transition to a new algorithm did not guarantee the attractiveness of the network as a whole. Some experts claim that such a negative tendency in network traction is the result of pressure on the part of the authorities of the United States, which are historically known to have persecuted Proof-of-Stake coins and projects.
Other unfavorable news has spread to the Non-Fungible Token market, which has been heralded as the trend of 2022. In fact, NFTs are so far just a newborn technology that is only just starting to dig into its possible application scenarios. The ones being employed presently in so-called Play to Earn games and other similar noun soup models are little more than platforms for speculation, as players really do not care about the superficial gameplay or the paper-thin stories. The possibility of minting and then selling off the in-game assets in NFT format for somehow recuperating initial investments into the game is the sole reason people keep playing. There is little value in terms of art of gameplay styles to speak of when it comes to blockchain-based games, and certainly not a single one can contend for the title of a tier-1 game, no matter how many developers from leading studios are shanghaied into the bacchanalia of the crypto industry.
The NFT collections from so-called digital art are just as affected by the downturn on the market, since investors are seeing that the initial hype has faded and the actual artistic value of the pieces they had acquired for millions of dollars are negligible at best. Certainly, there is a certain charm and allure about the pixelated images and avatars that so-called crypto enthusiasts are so proud of displaying on Twitter. But it would false to say that there is any actual value to the image of a pixelated ape and it somehow connects the holder of such a million-dollar NFT to a community of like-minded individuals. Add to that the fact that acquiring the same image is as simple as copy-paste, then the value of collections like the Bored Ape Yacht Club sinks beneath the waves. Most experts who have been overruled by the market hype have repeatedly stated that NFTs are worthless at present and their value is purely subjective.
But when it comes to the reasons for the downturn on the cryptocurrency market, few actually think of crypto market factors. It would be just as foolish to state that the cryptocurrency market is somehow disconnected from the global economy. Every single factor that has ever been in play in the conventional economy is just as equally translated into its digital iteration. Be it the influence of geopolitical factors, macroeconomic indicators, unemployment rates, stock market indices, legal actions, regulatory framework updates, oil price hikes and slumps, anything has an influence on the decentralized market and the exchange rates on it.
The reason for such an intimate connection is that the investors operating on both markets are the same people with the same sentiments and the same interests. As the prices of commodities fall, investors rush to sell off their assets in expectation of further depreciation or in a bid to stock up on lows. As the stock market falls, cryptocurrency exchange rates follow suit, since investors rush to abandon illiquid assets.
The connection to geopolitical situations is also traceable, since the same people from across borders are involved in the market. If the most recent global standoff between major powers is to be taken as an indicator, it becomes quite clear that when energy resources and nutrition become deficit commodities, then cryptocurrencies fall into the background as rather unattractive assets. The fact is that people engage in cryptocurrency trading and NFT collections when they have surplus funds to spend. If the savings are being eroded by inflation or exuberant energy bills, people are inclined to think of basic necessities, rather than the next digital ape in pixel format.
With the given situation prevalent on the market, all that remains is to guess what forecasts can be made about the future of the industry in the short term. If a global apocalypse can be avoided and the energy crisis in the western hemisphere is somehow resolved, then the global economy can expect to achieve a certain level of stability in the short term. However, macroeconomic stability does not guarantee the end of inflation, which is a very trick situation to handle, much less stop. It is unlikely that western participants in the cryptocurrency market, especially retail investors who make up the bulk of all investors, will have the free funds necessary to start buying cryptocurrencies. Instead, the most optimistic forecasts in a realistic scope entail the gradual return of the crypto market to levels seen just before the pandemic.
Extremely optimistic crypto enthusiasts and traders are stating that forecasts for 2023 entail the rise in the price of Bitcoin to as much as $88,000 a piece. They are basing their predictions on historical price charts. However, it is more likely that their words and predictions are little more than wishful thinking and encouragement of existing investors in the market. The thing is that the price charts for Bitcoin have never seen any shocks the likes of which are currently quaking the global economy to the core.
Regardless of the forecasts being made in diametrically opposite directions of the price spectrum, users who already have Bitcoin and other crypto assets in their portfolios should think of how much they can earn now and in the near future.
Sell Bitcoins or Keep Them
Anyone who has ever had contact with the cryptocurrency aspect of trading knows that the time to convert your Ether to USD is when the price is at its highest. Unfortunately, the Ethereum price has passed its maximum a while ago and is currently hovering in rather precarious territory that aligns with a bear market. As such, users who hold Ethereum or Bitcoin in their wallets should think twice before rushing off to sell their portfolios at the lows just for the sake of fixing profits.
The market is a cyclical environment that obeys its own laws of supply and demand. It is only natural that when shocks and economic turmoil are injected into the industry, demand will fall, while supply will either keep on increasing with emissions, or will remain constant. In either case, market dynamics dictate that every recession is followed by a depression extreme stage before rebounding into a recovery. The arrival of the recovery is a matter of perspective in time terms, depending on which economist is asked. Some state that cycles last for several months, while others adhere to several years as timespans.
In a market condition that is bearish, users who have Bitcoin should think whether it would be wise to consider the EOS exchange rate USD-wise as an alternative. The USD EOS exchange rate is rather dynamic and other assets in the fray have long exhibited better price traction than the mainstays of the digital economy. It is therefore logical for investors to either consider reorganizing their portfolios and doing away with illiquid assets, or purchasing some more demanded ones that are currently showing positive pricing.
Volatility is everything in the crypto market and users who are quick to react are the ones who will eventually be the most in profit. Monitoring the market is a full time job, just like trading. So, holders who think that just retaining assets in expectation of price increases are unlikely to receive any kind of gains under current market conditions, which are likely to persist for some time well into the future.
By dynamically reorganizing their portfolios and reacting to price lows and highs on some assets, market participants can leverage the strategies employed by scalpers and even arbitrage traders, who are adept at taking advantage of the large spreads across the market. Therefore, the question being raised in the given market situation is how to behave and which approach to take.
The obvious answer would be to wait out the storm and retain existing holdings. The history of the crypto market dictates that cycles in it are always in the extremes and those who wait are most likely to win. As such, users who are prone to succumb to fear, uncertainty and doubt are likely to lose the most, as they will rush to sell off their Bitcoins without thinking of the future. It is precisely these users who will be showering their heads with ash and filling Twitter with moaning when the price rebounds overnight in the wake of positive news regarding the global economy.
Key Takeaways
The crypto market is currently in a state of stale shock, reeling from the effects of the most recent geopolitical crisis. There should be no mistake made about the situation in the global economy, which is in a state of a very real and hot war being waged both on the frontline and in the economic field. All participants of the global economy are suffering and crypto holders are among the most affected, since their assets are extremely volatile.
