Cryptocurrency, including bitcoin, is experiencing a slump in step with the stock market and other investments. Industry experts are calling this bear market for cryptocurrency a crypto winter. But like a bear market for stocks, the crypto winter will end. Or will it?
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Finance experts and retail investors alike are wondering: will crypto recover?
Crypto has a solid chance of recovery — many of the top coins should weather the crypto winter and gain value in the long-term. However, cryptocurrency is notoriously volatile, and there is always a chance that it will not come back stronger, especially in the case of lower-value and less popular coins.
To really understand the chances for cryptocurrency’s recovery, it’s important to explore some of the factors driving down the price of bitcoin, ethereum and other altcoins right now.
How Bad Is the Cryptocurrency Crash?
Between Oct. 12, 2021, and Oct. 12, 2022, Bitcoin fell nearly 67%, according to Coinbase. Its current value of $19,587.35 as of Oct. 17, is roughly 70% less than its November 2021 high of $64,912.20 per coin.
Likewise, Ethereum is down about 64% from this time last year, and it has lost more than 72% of its value since its peak.
The other altcoins tend to follow Bitcoin pricing trends, and according to CoinMarketCap, the global crypto market has dropped about 60% in the past year, from $2.3 trillion down to $900 billion.
Since June 2022, the cryptocurrency market has remained relatively flat, ranging between a global market cap of about $800 billion to $1.2 trillion. While the 50% rise from $800 billion to $1.2 trillion between June and August 2022 may seem like a large movement, the cryptocurrency market is naturally volatile, and such a move is much smaller than previous bull runs. The cryptocurrency market has ranged lower since August, reaching the current value of about $900 billion.
What Makes Crypto Different from Other Investments
Unlike stocks, ETFs or even U.S. savings bonds, crypto is a highly speculative investment without a long history of ups and downs. Certainly, crypto has experienced crashes before.
Forbes Advisor reported that the last crypto winter occurred from January 2018 to December 2020. The crypto market has experienced significant dips since 2011, but that pales in comparison to the stock market’s centuries-long history of losses and gains.
Although crypto is growing in popularity, with an increasing number of companies accepting it as a form of payment, no one knows if today’s coins will be around decades from now.
Having said that, sticking with the more reputable cryptocurrencies like bitcoin can provide some stability and security if you are willing to hold for the long term. As with any investment, you should never invest more than you can afford to lose. But this is even more true in the case of crypto, which is regarded as a volatile investment with an unproven track record.
However, if you have money to play with and you’re willing to take a chance for big returns, buying crypto in a down market — especially reputable coins like bitcoin and ethereum — can represent a tremendous value.
Ric Edelman, founder of the Digital Assets Council of Financial Professionals and a former independent financial advisor, previously told GOBankingRates that “for long-term investors, price declines represent a buying opportunity.”
Of course, it all hinges on the important question of whether the crypto market is recovering.
Will Crypto Recover in 2022?
The near future might not be positive for the cryptocurrency market. Bitcoin and other cryptocurrencies continue trending downward, although at a much slower rate than during the early months of 2022.
The cryptocurrency market nowadays moves more in sync with the stock market than it used to, according to an analysis from the International Monetary Fund. With economists predicting a possible recession on the horizon, this might spell bad news in the short term for the cryptocurrency markets.
However, in the long term, things may not be so bleak. “Blue-chip” cryptocurrencies such as bitcoin have recovered from large crashes in the past, continuing to grow exponentially. If investors believe a specific cryptocurrency has the potential for long-term growth, they may choose to invest now or in the near future, while prices are low.
Will Crypto Survive a Crash?
The crypto market has bounced back before, and if the stock market can be referenced as an example, it is likely to rebound again.
The Guardian traced the decline of cryptocurrency values, led by Bitcoin, to the collapse of a coin called Terra. Terra was supposed to be a stablecoin. That is, its value was tied to the value of the U.S. dollar. But Terra dropped from more than $50 billion to virtually worthless in one week. With this event, other stablecoins also began to lose value and then bitcoin, too, started to drop.
While the failure of Terra may have been a catalyst, other economic factors, including inflation and rising interest rates, also contributed to the crypto crash. According to the Guardian, “when inflation rises, bitcoin tumbles, and as growth prospects diminish, so too does the opportunity for a digital revolution.”
However, crypto’s viability is tied to the technology that powers it: blockchain. And with the growth of the metaverse, NFTs and even NFT gaming, the technology behind cryptocurrency seems more prevalent — and promising — than ever.
In his prior interview with GOBankingRates, Edelman noted: “The underlying features of blockchain technology represent huge improvements for commerce: businesses worldwide using the tech will be able to operate faster and cheaper, with greater security, transparency and inclusion. Just as the Dot-Com Bubble bursting did not cause the end of the internet, today’s crypto winter won’t translate into the end of Internet 3.0.”
Is the Crypto Market Ever Going to Recover?
The question remains: Will crypto ever go back up to its 2021 record highs when the price of a single bitcoin exceeded $64,000? Some experts believe not only will crypto go back up but that bitcoin could surpass $100,000.
Can Crypto Bounce Back?
Many coins will likely cease to exist as this latest crypto winter winds down. Many penny cryptos, for instance, which are highly speculative and volatile investments, may crash with no hope of revival. But so-called “blue-chip” cryptocurrencies, including bitcoin, are more likely to weather the storm.
Regardless of price, coins in the top 500 by market cap are more likely to yield positive returns over time.
Takeaway
If you are not a risk-averse investor, it’s not too late to buy the dip in bitcoin and other cryptocurrencies. Stick to coins with a known reputation and a high market cap to increase your odds of investment success. You can purchase crypto now on any of the best crypto exchanges for 2022.
Chris Ozarowski contributed to the reporting for this article.
Information is accurate as of Oct. 17, 2022.
This article originally appeared on GOBankingRates.com: Will Crypto Recover? Here’s What You Should Know
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
