Crypto is crashing and could slump further — what should you do?

Bitcoin and other cryptos have fallen to their lowest price since 2020 and there is reason to believe they could fall even further.

Every morning seems to bring new pain for crypto owners as they wake up to open Binance, Coinbase and other trading apps to be greeted by a sea of ​​red.

On Thursday morning, the price of many major cryptocurrencies hit their lowest levels since late 2020, including bitcoin which fell to $40,602.04.

Bitcoin was worth over $63,000 as recently as March 29 and nearly $90,000 in November of last year.

The second most popular coin, Ethereum, fared no better, falling as low as $2,909.78 overnight – miles from its peak above $6,300 during the same November peak in 2021.

“Crypto is dead”

The Crypto Market Crash Has Caused Monumental Losses In Owners’ Wallets – but there are predictions that it could get worse.

There have been four previous major bitcoin crashes since 2014 and each time the price hit the 200-week moving average.

This time it sits near $29,000, suggesting that the price could drop another 25-30% before the bleeding stops.

The Spectator’s Ross Clark went so far as to declare “Crypto is Dead”.

“The warning sign for cryptocurrencies is not so much that they’ve crashed…but that they’ve gotten boring,” Clark wrote.

“Bitcoin has suffered many crashes before, but bottom-feeders quickly rushed into the market and sent the price bouncing back. This time around, there are few signs of enthusiastic speculation.

“Many believed that Bitcoin and other cryptocurrencies could prove to be an inflation hedge. These hopes were dashed. While most currencies devalued against real-world assets, cryptocurrencies lost value faster,” he added.

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So what should you do?

While countless owners have dumped their crypto in recent days in an attempt to limit the damage, others have yet to pull the trigger.

Financial advisors say now is not the time to panic, but it is time to rebalance your portfolio and consider selling any coins that may not have long-term value.

“Bear markets are usually a great time to accumulate coins that you have long-term belief in,” Gritt Trakulhoon, senior crypto analyst at investing app Titan, told Bloomberg. “It’s a tough market, that’s for sure, but it’s a good time to strategize.”

Trakulhood predicts that 90% of coins will “not recover” from the current crash.

“At this point, being slightly more focused on coins you have strong conviction about is better than being diversified into altcoins you don’t really understand,” he said.

“They will simply die – but those who survive will thrive.”

As for those considering buying the dip, they should exercise caution.

Oleg Giberstein, co-founder of automated crypto trading platform Coinrule, told Forbes that the market could remain difficult for up to two years and worsen during that time.

“A lot of first-time investors have been burned trying to catch falling knives,” he said.

Even stablecoins are not stable

One of the major shocks this week came from the increased volatility of so-called stablecoins.

Terra UST, a cryptocurrency whose value is supposedly pegged to the dollar, lost half of its value this week, spreading panic in the already feverish world of crypto-assets.

Terra UST is expected to trail around $1 per coin, but at one point it was trading as low as 30 cents on Wednesday before recovering to around 75 cents.

So-called stablecoins like terra are supposed to be less volatile than cryptocurrencies like bitcoin or ethereum.

Their peg to traditional currencies aims to provide investors with more certainty and security.

But terra and several other stablecoins are not backed by any revenue streams, instead relying on algorithms to quickly move funds between cryptocurrencies as they rise and fall in value.

Luna Foundation Guard, which backs terra, said on Monday it deployed the equivalent of $1.5 billion in cryptocurrencies to stabilize the coin.

The coin’s founder, Do Kwon, said on Twitter on Tuesday that he was set to present a recovery plan.

But terra continued to slump, perhaps caught up in a broader cryptocurrency selloff that saw bitcoin plunge this week to its lowest value since last July.

US Treasury Secretary Janet Yellen told a Senate committee on Tuesday that the terra episode illustrates “there are risks to financial stability and we need an appropriate framework.”

Anto Paroian of hedge fund ARK36, which specializes in crypto assets, said long-term regulation would be a “net positive for the crypto space.”

“But if stablecoin issuers are regulated as tightly as banks, it could stifle one of the most innovative, successful and important sectors of the crypto market,” he added.

— with AFP

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