Over the past weeks, cryptocurrency values have nose-dived, projects have disappeared, organisations have ceased activities, and crypto workers have lost their jobs. But is this a cryptocurrency crash or a market correction?
The announcement by Coinbase that it was shedding 18% of its workforce came as CEO Brian Armstrong warned that recession and a new crypto winter are on the way
According to CoinMarketCap, there are currently more than 500 digital asset exchanges and almost 20,000 cryptocurrencies.
Just five years ago, when Binance arrived, there were fewer than 200 exchanges and not even 800 cryptos.
In a few short years, the market has become overpopulated and blighted by dodgy altcoins, shitcoins, and scams.
The same is happening in the NFT markets, which are deluged with assets of questionable long-term value.
As we move towards the end of 2022’s Q2, we have seen redundancies, liquidations, and most crypto prices tanking. This makes investors, and the market generally, increasingly nervous.
It’s no wonder the Fear and Greed Index is in ‘extreme fear’ territory.
A Cryptocurrency Crash or an Opportunity?
But is this a cryptocurrency crash that threatens the viability of digital currencies, or is it an anticipated market correction?
Savvy investors would suggest it is the latter and see now as the ideal shopping time. They will scoop up low-value assets with good use-cases and utility with the expectation of the market recovering, corrected and stronger.
Others, including newbies, will panic rather than HODL, cashing out and, ironically, adding to the decline and panic.
In my view, this bubble burst and the onset of a recession – two consecutive months of negative growth – were inevitable for cryptocurrency.
Like traditional assets, such as stocks, shares, and real estate, digital assets are not immune from the challenges facing international economies. We are recovering from the COVID-19, there is war in continental Europe, extreme politics is in clear evidence, energy prices have exploded, and people are experiencing a cost-of-living crisis in many places.
Of course this impacts the cryptocurrency markets. What makes matters worse for crypto is social media.
Posts and influencers on social platforms have driven market trends in crypto. They have contributed to substantial price rises for new coins in short periods and helped the markets reach unprecedented highs.
The immediacy of social media is the power that feeds these trends. Now that times are tough, negativity on social media is feeding the decline just as quickly.
The speed with which the market reacts to a tweet sparks further panic, more selling, and a deepening crisis.
No Surprises
I agree with Brian Armstrong that after a 10-year boom for digital assets, where we are now is no surprise.
Do I feel we will have a tough winter? Yes, but does that have to be a bad thing? If we see this period as one of re-evaluation and correction, then we can, perhaps, look to a brighter spring.
While global economic factors are impacting crypto markets, what’s happening is also a long-overdue clean-up. Businesses and coins that offer no viability will be casualties, and a market of better, stronger assets and organisations will emerge.
It will take time, but I don’t see this as a cryptocurrency crash that will end the industry. I see it as a market correction, just as we have seen time and time again.
Remember the dot-com bubble of the late 1990s? The market exploded in value as speculators rushed to get involved. Many businesses were simply not viable and cost investors huge sums as they folded.
Some saw the bursting of that bubble as the end. Of course, it wasn’t, and for evidence, just look at the roles of Google, Amazon, and Meta (Facebook) today.
Interesting Crypto Times Ahead
In my opinion, this is not a bad time. It is a time when we can achieve clarity and re-evaluate the market.
It is a time when we can look to a maturing of the digital asset market, reassess regulation for the benefit of investors, and explore more ways to protect the environment.
If I’m right, Q2 2023 will be an interesting time.
And before that, in Q4 this year, we will see key stablecoins and the ‘old guards’ of crypto, Bitcoin and Ethereum, re-establish their positions.
But the climb back will be more measured than the value hikes we have seen in the past. The days of the social media-driven hype and frenzy that saw meme coins like Dogecoin record increase in the thousands of percent are, hopefully, over.
Yes, if you got in and out at the right times, you could make a killing. But this type of trading caused the volatility which is holding back the broader adoption of cryptocurrency.
I think now is time to keep the faith. I believe we will see positive movement in the market again before the year is out and a more positive, mature future.
I am offering this not as investment advice, of course. That is not my role, and any investment you make should be based on your own independent research.
I am offering this as the opinion of an optimistic founder of a fintech business who is looking forward to the next 10 years of doing business in a stabilised, mature market, with investors protected by enforceable regulation and the days of billionaire wannabees cashing in on the misfortune of others ended.
