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What is happening in crypto market?
Cryptocurrencies have fallen sharply globally in recent years, with a $2 trillion decline in value after the 2021 rally. Bitcoin, the world’s leading cryptoasset, has lost 70% since its all-time high in November, when it reached $69,000. This situation corresponds to a new long bear market known as the “crypto-winter” or “bear market”, the last of which took place between 2017 and 2018.
According to experts, the current bear market context is due to the fact that the general economy in crisis, coupled with inflation and rising interest rates, has put unsustainable pressure on an over-leveraged crypto ecosystem, whose funds have become, incidentally, the prime target for liquidators seeking to cash them out in a hurry.
With crypto spot values falling below price, traders have been forced to sell at a loss, liquidating holdings. This has generated a domino effect typical of bearish trading, dragging the market down.
Meanwhile, in the midst of the bear phase (the current one), expert bitcoiners and miners are holding out and following a long-term strategy, accumulating as much bitcoin as possible and participating in reliable projects, while waiting for demand to be restored.
In the end, the bull market/bear market loop rewards the patient, and punishes both hurried speculators and hesitant investors who are late to enter the bull phase.
How to deal with this bear market & what will the future look like?
Actually the bear market, although worrying, is a good context for long-term investment. Market cycles last about 4 years from top to bottom, and the current cycle, which started in 2020, still has time for a full recovery until the next bull market.
Most of the Bitcoin and Ethereum (the two main cryptocurrencies) reserves, are in the hands of about 10,000 investors, who control 1/3 of the total number of tokens in circulation. As they are few and experienced, the hypothetical collapse of their investments could not cause a real cataclysm.
On the other hand, and despite the growing regulatory pressure on cryptocurrencies exerted by some governments (or even direct blocking, as in Kazakhstan or China), there are also cases of support for crypto growth, such as that of Mexico by facilitating credits for mining, or the well-known officialization of Bitcoin in El Salvador. And, above all, there is the tacit support of the United States, which seems to be playing a double game in the matter: by tightening regulation on the one hand, but also allowing the launch on Bitcoin Futures Exchange-traded funds (ETF), which promise to inject great liquidity into crypto ecosystem indirectly.
In addition, payment gateways have strengthened their support for crypto transactions, and, in general, web and crypto technology continues to advance with the sophistication of the various apps and devices (e.g. DeFi). And also with the slow but unstoppable adherence to the blockchain of the main players on the Web 2.0.
All that remains is for confidence to gradually recover. And for the crypto economy to become popular as an everyday payment method. This would consolidate it completely, making it more efficient and stronger in the face of global crises such as the one we are currently experiencing.
