The cryptocurrency market is having a tough week, with major cryptocurrencies falling.
Bitcoin, the world’s most valuable cryptocurrency, dropped to nearly $21,000 on Wednesday. The asset has lost a quarter of its value since Friday and is nearly 70% down from its November high of $68,000. Ether, the second most valuable digital currency, has lost about a third of its value since Friday and is down 75% from its highs.
More worrying are the structural problems that make it impossible for investors to withdraw their money from exchanges. Binance, the biggest ‘crypto exchange’ on the market, paused withdrawals for a few hours on Monday, saying that some transactions were “stuck”.
Celsius Network, which has 1.7 million users, has temporarily halted withdrawals due to “extreme market conditions”. The administrators of exchange they did not say when they would reopen operations, indicating only that “it would take time”.
Coinbase, the largest in the U.S. by turnover, announced on Tuesday that it would lay off about 18% of its workforce, citing a recession that “could lead to another crypto winter and could last for a long time.” ”.
But so far, at least, experts aren’t too worried. Long-term investors are ignoring the extreme lows in the value of digital currencies and the collapse of exchanges.
They say this is normal and that a bear market in cryptocurrencies is not the same as a bear market in stocks: the lows are more extreme, but so are the highs.
“Cryptocurrency bear markets typically fall between 85% and 90%,” said Jason Yanowitz, co-founder of Blockworks, a research platform for cryptocurrency investors, executives and builders. Over the past decade, two protracted cryptocurrency crises have seen bitcoin lose more than 80% of its value, but the currency has recovered – and then some.
During the 2017-2018 crypto bear market, bitcoin plummeted 83% from $19,423 to $3,217. But in November 2021, the coin was valued at $68,000.
During the same period, ethereum dropped from $1,448 to $85, down about 95%. In November 2021, the coin was valued at $4,850. The bear market between 2013 and 2015 also saw bitcoin drop about 82% from $1,127 to $200.
“If you bought [bitcoin] at the height of the 2017 high (about $20,000), you saw an 80% decline in the following year. Even after the latest cryptocurrency market decline from all-time highs last November,” said Felix Honigwachs, CEO of Xchange Monster.
Given that the cryptocurrency started trading in 2009, it can be considered new, meaning it is natural for there to be greater volatility, says Yanowitz.
He cites as an example Amazon shares, whose share price soared to $113 in the internet boom (late 1990s), before falling 95% to $5.51. But on Tuesday (14) it closed trading at US$ 102.31, and it has already traded above US$ 2,000 in 2021.
“I really disagree with people who say there is no way to recover from something like this,” says the Blockworks co-founder. “I think people look at cryptocurrency and think it’s weird or not real. If you don’t think cryptocurrency is real, you probably think it’s overvalued.” But this drawdown is not as bad as the last crypto bear market, he added.
Other tech stocks are down significantly now, the expert claimed, not just cryptocurrencies. Uber’s shares are down more than 50% for the year. Lyft is down 67% and Netflix is down nearly 72%.
Still, there are major concerns about the digital currency. Fewer investors were exposed to the cryptocurrency’s sharp drops during the last crisis, so they can now lose more money.
Some start-ups may also suffer during the downturn in the crypto market, but digital currency values are likely to rise again in the long term, said John Browning, co-founder and managing director of Band Financial.
Source: CNN Brasil
I’m James Harper, a highly experienced and accomplished news writer for World Stock Market. I have been writing in the Politics section of the website for over five years, providing readers with up-to-date and insightful information about current events in politics. My work is widely read and respected by many industry professionals as well as laymen.
