As Global Interest Diminishes, Should You Be Worried About Your Crypto Investments Now?

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Dubai: Investments in cryptocurrencies have steadily declined after peaking in November 2021, with trading volumes dropping to significantly low levels since then. Is there an end in sight to this extended season of, what experts call, the crypto winter? If not, should investors be concerned?

Cryptocurrencies are still down over $1.5 trillion (Dh5.5 trillion) since the peak of a massive price rally in 2021, with the total market valuation currently standing at 1. 2 trillion dollars (4.4 trillion Dh) as well as the volume of crypto traded daily. at 70 billion dollars (257 billion Dh).

The crypto winter has also wiped out over 67,000 crypto millionaires since it peaked at around 100,000 in 2021 and just last month saw the trading volume of the world’s largest crypto token, Bitcoin, which accounts for the majority of the overall market, fell by almost 700 billion dollars (Dh2.57 trillion).

The total market value of cryptocurrencies is estimated to have declined significantly, particularly between May and June 2021, as digital coins have become less likely to be an investment tool, wrote Raynor de Best, researcher at Statista, a database of online market and consumer statistics.

Global cryptocurrency market capitalization (in billions of US dollars) by week from July 2010 to April 2023 Image credit: Statista

Does cryptocurrency still have value as an investment today?

The price of Bitcoin has been erratic and most other cryptocurrencies follow its larger price swings. This volatility attracts investors who hope to buy when the price is low and sell at its peak, thereby making a profit, Best’s Raynor added. However, this does little to contribute to price stability.

Most cryptocurrencies are still far behind their all-time highs. Bitcoin is still down 50% from its November 2021 high of $69,000 (Dh253,400), and Ethereum, which is now trading at $1,900 (Dh7,000), hit an all-time high of $4,000 (Dh14, 689) in 2021. But that’s not all bad news.

Much to the relief of investors, Bitcoin and Ethereum are currently staging some recovery. Bitcoin is up almost 80% this year and likewise Ethereum has almost posted a 65% rally so far this year. Digital investments can therefore not yet be amortized.

Even though cryptocurrency trading volumes are still much lower than before, the good news is that 2023 was able to absorb all the significant losses the market suffered in 2022.

-Brian Deshell

So, even though cryptocurrency trading volumes are still much lower than before, the good news is that 2023 was able to absorb all the significant losses the market suffered in 2022, says Brian Deshell. , a UAE-based cryptocurrency trader and analyst.

If we look at the April numbers, Bitcoin and Ethereum jumped 17% and 46%, which is a remarkable achievement. Similarly, rival token Cardano (ADA) also saw a gain of over 50% in the first four months of this year and has a market value of $13.3 billion (Dh50).

Why are cryptocurrency prices still much lower than before?

The main reason for the market slowdown is the downfall of one of the world’s largest cryptocurrency exchanges, FTX. The FTX bankruptcy not only triggered a huge sell-off, but also reduced liquidity in the crypto market.

Multiple issues with FTX finances and regulatory investigations stunned crypto investors and left Bitcoin falling to the lowest level in two years, Deshell added. The surprising turn of events has also led to a turbulent situation in the crypto industry.

While last year’s crisis was triggered by the collapse of FTX, which processed about $1 billion (MAD3.67 billion) in transactions every day, its collapse has a ripple effect on many other crypto exchanges.

This has resulted in a high level of mistrust and skepticism among investors towards crypto establishments and on the regulatory front. The FTX contagion effect is quite obvious, several questions have now been raised about the survival of other crypto trading companies around the world.

So while last year’s crisis was sparked by the collapse of FTX, which processed around $1 billion (Dh3.67 billion) in transactions every day, its collapse has a ripple effect on other crypto exchanges, posing a threat to the pace of recovery in the cryptocurrency market even today.

Verdict: should you be worried about your crypto investments today?

The bottom line is that the cryptocurrency market has seen its worst and the crypto market has literally been through some of the fiercest storms in the past few years. But with the scorched crypto market now having a fresh start and showing positive signs of recovery, should investors still be worried?

If you are an experienced or seasoned investor, crypto experts widely believe that in this type of scenario, you can look to invest in digital stablecoins such as Bitcoin or Ethereum, but should only give 5% exposure to cryptocurrencies as a whole. investment portfolio.

For a new investor, this is also a crucial time to observe the performance of the cryptocurrency market, because once this chaos is extinguished, you may be able to find your favorite digital asset at a fair value.

-Brian Deshell

This is because cryptocurrency prices are always very volatile and extremely speculative, so it is advisable to only invest an amount you can afford to lose, especially if you are a newbie investor in a cryptocurrency class. incredibly risky assets.

As to whether or not investing will become more stable in the near future, although there is still uncertainty about this among industry analysts, with more global crypto regulation just around the corner, the digital currency may stabilize in the coming months. But only time will tell for sure.

With cryptocurrencies, it is always better not to invest impulsively. Moreover, for a new investor, it is also a crucial time to observe the performance of the cryptocurrency market, because once this chaos subsides, you may be able to find your favorite digital asset at a much higher value. fairer, Dshell added.

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