The cryptocurrency market saw an all-time price hike in 2021. It wouldn’t be wrong to say that crypto investors gained voluminous profits in 2021. But this trend changed in winter 2021. Market prices saw a huge decline in value. Bitcoin, a favorite amongst investors was quite easy to crash.
An important factor about cryptocurrency is its volatility. Investing in cryptocurrencies is unstable as the prices keep surging and declining. This hike and fall are attributed to many factors. For example, the price of bitcoin hit its peak when Tesla announced its interest in Bitcoin. Elon went a step ahead and announced that bitcoin is acceptable. Buyers can pick their automobile in exchange for bitcoins to use platforms like this Bitcoin system. This tweet caused a huge stir in the market.
There are also other market risks associated with investing in cryptocurrencies. Being an investor you need to consider market risks before investing. The total market capitalization of cryptocurrencies has reached 176% as of 2021. Despite these promising figures, experts think to watch out for market crash. There will be a major pullback of some popular names leaving only a few to exist by the end of 2022.
So, what causes the market crash?
- Before understanding survival, let us understand the factors contributing to a market crash.
- Rotation of investments
- Introduction of regulations and third-party oversight during transactions
- Market changes and countries banning crypto mining
The most recent crash in Dec and continuing in Jan attributes to two factors. The first is China banning all crypto transactions. The country has come out banning cryptos. There is a ban on data mining resulting in huge market fluctuation. This also contributed to prices surging to an all-time low. The impact was evident on many cryptos including Bitcoin, Ethereum, and Dogecoin.
The decision by Tesla on reversing their policy on bitcoin payment is another factor. Tesla came out with a clarification on their decision on crypto payments. The statement was released last week. The team clarified that there will be a study on environmental factors and hazards in data mining.
Which cryptos may survive the market crash?
We have understood the operating model of cryptos. Now let us also look and understand how and which cryptos have the potential to survive a market crash.
Bitcoin: This is the oldest and pioneer in the crypto industry. Since its launch in 2009, Bitcoin has seen many market crashes. For the past decade, Bitcoin has also been holding its number one position. While the market fluctuates upcoming policy changes and market crashes may not impact its market value. This crypto is not going to vanish from the market. But yes, there is an impact on your return on investment.
Ethereum: Launched in 2015, Ethereum also uses blockchain technology. This crypto holds many similarities to Bitcoins including decentralized finance and blockchain platform. Many financial institutions vouch for this crypto model. Next to Bitcoin, Ethereum is another crypto that will survive this upcoming crash.
Dash: This is open-source crypto. This crypto also utilizes the blockchain and other similar concepts of Bitcoin. This is popular amongst investors in Zimbabwe and other developed countries like Spain. Launched in 2014, this crypto has now gone one step ahead. It has announced its partnership with Microsoft China. Dash is also used as an exchange medium in Japan’s exchange ministry.
The coming years (2022 – 2025) will need investors to have a huge risk appetite. You need to keep a careful watch on market conditions to ensure the safety of your investment. There are many cryptos launched daily. You need to consider if these cryptos can survive the market crash. Investing in cryptos and Initial Coin Offerings is risky.
Do your research: We have already discussed that the crypto market is volatile and risky. You need to study the market nature of cryptos before investing. Ensure that you have gained adequate knowledge to invest. If you are still doubtful, then there are many investment experts whom you could consult. This will make sure your hard-earned money is taken care of and not invested in the wrong place. Also, choose an exchange that best suits your need. An exchange should be able to provide you a brief on the next 05-year market analysis.