Cryptocurrency Meltdown and Investment Takeaways
If you are gunning for investment-related roles then this article's for you to understand where crypto and NFT investments are headed.
The crypto market's massive crash in recent months pulled down Bitcoin's value by about 70%. Newer currencies, such as Ethereum and Cardano, also took heavy losses. The crypto market itself lost over US$200 billion, with Celsius, a US-based lender of cryptocurrency, forced to suspend withdrawals. While some crypto funds like Three Arrows Capital filed for bankruptcy in July 2022 signaling the market turmoil, somehow the investor sentiment has stayed hopeful in most Asian regions and beyond.
While experts are uncertain whether the market is undergoing a correction, or this crash has no signs of hope in the long term. This has investors wondering whether to enter the market to “buy low”, or if they should cut their losses and/or stay away altogether.
However, not all see these “dips” as pure doom and gloom. Oleg Giberstein, co-founder of Coinrule (an automated crypto trading platform) remarked this year, that crypto is essentially suffering from the same stress factors affecting other areas of the economy. “It’s not just crypto that’s down, everything is down, and over the next 6-12 months the economic outlook is bad. Central Banks are between a rock and a hard place with regard to slow economic growth and high inflation. So, investors are escaping ‘risk-on’ assets like crypto and tech stocks,” Giberstein said.
Inflation and rising interest rates have dampened traditional stock trading with the number of trades placed at traditional US brokerages down by 32 per cent in Q1 2022.
So where does that leave investors? Do they follow the idea of “buy the dip” or do they steer clear? Those who engage in buying during dips, do so with the belief that prices will increase once again, meaning potentially significant profits in the future. So #web3 enthusiasts and investors are hoping for a rebound like last year when investors snapped up cryptocurrencies, resulting in them rising once more and even peaking around the third quarter.
Giberstein has advice for those looking to get into crypto. He states that those choosing to buy whilst prices are low should select an amount they’re happy using when purchasing cryptocurrencies every month. He also advised that investors should not concern themselves with how prices might fluctuate over the coming 2 years.
In the backdrop of this, British fund managers are lobbying for the approval of blockchain-traded funds. So asset managers understand the potential of generating alpha via tokenisation while also slashing costs. The call for better regulations also comes with news like Fidelity announcing it would allow investors to include cryptocurrencies in their portfolios in 401(k) retirement schemes.
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