Despite the recent digital currency “crash,” crypto is not going away. Cryptocurrency experts believe this to be the case and here’s why.
What Is A Cryptocurrency?
A cryptocurrency is a digital or virtual asset meant to function as a means of exchange that uses encryption to safeguard transactions, regulate the production of new units, and verify asset transfers. Because cryptocurrencies are decentralized, they are not controlled by governments or financial organizations.
The earliest and most well-known cryptocurrency, Bitcoin, was launched in 2009. Since then, many different variations have emerged. Some more prominent ones include Ethereum, Tether, and U.S. Dollar Coin.
Consequences of Cryptocurrency Performance in Israel Last 2018
2018 was a roller coaster year for cryptocurrencies. Prices started the year on a high, with Bitcoin reaching almost $20,000 in December 2017. However, prices then plummeted, and by December 2018, Bitcoin was worth less than $4,000.
That particular crash in prices had real-world consequences for businesses and individuals who use digital currencies. Expect more recent incidents to do the same, though perhaps to a lesser extent each time as confidence grows in cryptocurrency’s long-term viability as a form of money. But maybe not.
For example, in Israel, there is a company called Bitmaintech Israel that manufactures cryptocurrency mining machines. The 2018 price drop forced the company was forced to shut down operations and lay off many employees.
In addition, individuals who had invested part or (hopefully not) all of their life savings in cryptocurrencies have seen a significant decrease in net worth. Some have been forced into bankruptcy as a result.
Another consequence of the crypto crash is that people became less likely to invest in or use cryptocurrencies for payment. When the value of any asset is so volatile, fewer businesses are willing to accept payment for something with a currency that could lose half its value overnight.
Different Cryptocurrencies in Circulation
As of 2022, there are over 19,000 different cryptocurrency projects in circulation. The top ten cryptocurrencies in the market are the following.
- Bitcoin (BTC) with a market capitalization of USD 410 billion
- Ethereum (ETH) with a market capitalization of USD 142 billion
- Tether (USDT) with a market capitalization of USD 67 billion
- U.S. Dollar Coin (USDC) with a market capitalization of USD 55 billion
- Binance Coin (BNB) with a market capitalization of USD 37 billion
- Binance USD (BUSD) with a market capitalization of USD 17 billion
- Cardano (ADA) with a market capitalization of USD 17 billion
- XRP (XRP) with a market capitalization of USD 15 billion
- Solana (SOL) with a market capitalization of USD 10 billion
- Dogecoin (DOGE) with a market capitalization of USD 7 billion
Bitcoin’s Growing Popularity and Another Crash
In the years since the 2018 crash, cryptocurrency prices have slowly but steadily climbed back up, alternately soaring and creeping. By November of 2021, it had topped $64,000. Then came the fall. Again. By June of 2022, Bitcoin was trading at just a little over $19,000 and prior predictions that it would reach $100,000 by 2022 seem farfetched.
The obvious lesson here is that cryptocurrency is volatile. Perhaps as much so as any major asset in history. But even as it presently scrapes around down in the doldrums, many people remain confident in the long-term prospects of digital currencies.
So, what should you do if you are affected by the crypto dive?
If you are a business owner who has been accepting crypto as payment, you might reconsider that idea until the crypto industry and its leader, Bitcoin, achieve some sort of long-term stability. It might be a good idea to return to good old fiat currencies (USD or EUR) either in place of or in addition to cryptocurrencies.
If you take a Bitcoin payment and the currency dives 10% overnight, you just lost 10% of the value of the sale. No business can tolerate that model for long.
If you are an individual investor, don’t panic sell. You shouldn’t be investing money you can’t afford to lose anyway. Hold onto your coin positions and wait for the market to rebound. There are no guarantees but likely it will. Selling after a huge dive only ensures you’ll take a loss. Holding on at least offers hope of a rebound.
The thing to keep in mind is that cryptocurrencies are no flash in the pan. They might be down at the moment, but they are not going away. Too many people like them too much for that.
To add another twist to the story, there is a possibility that blockchain, the underlying technology that makes cryptocurrency possible, might continue to stay strong as the currencies it supports drop in value. We can already see evidence of this in the Israel stock market. Is blockchain just lagging or is there a fundamental confidence in it will outlast cryptocurrencies.
Advantages and Disadvantages of Cryptocurrencies
Cryptocurrencies have several advantages. They are fast and secure, and they offer a degree of anonymity. In addition, transaction fees are usually lower than traditional payment methods like credit cards.
However, there are also disadvantages. As already demonstrated, cryptocurrencies are highly volatile, so their value can change significantly in a short time.
They are also not very widely accepted as a form of payment yet, and because they are decentralized, cryptocurrencies are not subject to government regulation. This could change in the future, but for now, it is something to be aware of.
Investing in Cryptocurrencies
If you are thinking about investing in cryptocurrencies, there are a few things you should keep in mind.
First, do not invest more than you can afford to lose. Cryptocurrencies are still a relatively new and volatile asset class, so it is essential to be cautious.
Second, do your research, just like in the stock market. Vulcan Materials is a different beast than Walmart, though both are on the S & P 500. There are thousands of different cryptocurrencies and they are not all created equal. Before investing, it is essential to learn about the other options available and choose the one that’s right for you.
Third, understand that you may have to wait a while before seeing any returns. Cryptocurrency prices can fluctuate significantly in the short term, so do not expect to make a fortune overnight.
Like anything else, patience is critical when it comes to investing in cryptos. As with the broader stock market, the get rich quick philosophy can get you financially slaughtered.
The Future of Cryptocurrencies
Despite the recent price dip, experts believe cryptocurrencies are here to stay. There are benefits over regular fiat currencies that keep them growing in popularity.
Back to another business angle. As more businesses accept cryptocurrency for payment, there’s a good chance we’ll see that dreaded government regulation make its presence felt.
The Bottom Line
Digital currency dives have created real-world consequences for businesses and individuals who use cryptocurrencies. However, many experts believe that cryptos are not going anywhere and will eventually rebound.
In the meantime, those affected by the crypto dive should seek alternate forms of payment or investment opportunities. Whatever you do, do not panic sell – hold onto your coins and wait for the market to rebound.