We have been seeing a massive panic in the market in recent days, and the price of bitcoin has briefly fallen below $ 30,000. Compared to its peak, this represents a drop of 54%, and crypto assets lost this month a market value of $ 800 billion, which is really not a little drop. What caused this scenario? In principle, it was a combination of two factors. The first and longer-term, of course, is the overall geopolitical situation in the world, and the war in Ukraine certainly does not help the economies of individual states. This brings investor uncertainty and a reluctance to invest in riskier assets. They also perceive developments in central banks, which are gradually raising interest rates in the fight against inflation.
The second factor and trigger of the mentioned fall was the failure of some stablecoins, which were linked to the US dollar. Especially TerraUSD, the fourth largest stablecoin globally, lost up to a third of its value on Tuesday. This, of course, worried the number of investors who decided to move their funds elsewhere. A spiral of panic has erupted, but it must be said that similar scenarios are nothing new in the crypto market.
As many as 40% of BTC investors are currently sitting on unrealized losses. This means that they bought bitcoin more expensive than its current value, and many of them often panic and sell. In the short term, they try to protect against further losses. However, if we look at the situation in the longer term, these investors are usually the only ones to lose. We are currently watching that smaller hodlers are selling too.
However, analytic companies Coinshares and Glassnode follow an interesting combination of investor activities at different levels. While smaller ones sell and try to eliminate risks, big players look for opportunities and use the current panic to buy cheaper. Of course, these investors and institutions have a lot more capital to survive even larger storms in the market relatively calmly.
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We mean that similar development is absolutely normal, and this is only a cycle that repeats regularly. The current 54% drop in BTC is essentially nothing compared to previous entrances to bear markets, where we have seen declines of 77%, or as much as 86% compared to ATH. In the long run, those who best estimate the bottom in this situation and use it to buy will gain the most.
Billionaire Mark Cuban also commented on the situation and predicted the mass-die of crypto projects. This well-known investor claims that cryptocurrencies are currently going through the same phase as the Internet at the beginning of the new millennium. Similarly, we were able to see many startups and various projects at the time, which, however, often brought only minimal or even no added value. The vast majority of them no longer exist today, and a similar fate awaits various crypto projects.
CRYPTOCURRENCIES AS A TOOL FOR CRIMINALS?
According to Mark Cuban, the cryptocurrency industry needs to focus on quality solutions and improve business models. He talks about various applications, NFT and DeFi, as examples, which are often just copies of other solutions and do not bring anything new. These projects are most likely to be doomed in the future. We observe a very similar situation from the point of view of crypto exchanges, and the vast majority of them offer an almost identical range of services and tools. That's why we at Dollero Technology decided to take a more difficult path in developing our own exchange, and we want to create a platform that will offer traders much more than the competition. Although this is a much more demanding and lengthy process, as a result, we agree with Mark Cuban and know that this added value will be crucial in the long run.