The bitcoin and cryptocurrency platform is struggling. What’s behind the collapse? – Nation
The sharply reduced value of Bitcoin and mayhem on the entire main electronic money The platform leaves many investors wondering about their digital wallets, and leaders in the space warn of a “crypto winter.”
So what’s going on, and what does it mean for your portfolio? Here’s what you need to know.
What is happening with Bitcoin?
Bitcoin is continuing a downward spiral that marked much of 2022 for the popular cryptocurrency.
The digital currency continued to fall on Tuesday after dropping 16% on Monday sending its value as low as $22,400. Bitcoin has lost more than two-thirds of its value from its all-time high last November.
Bitcoin is not the only crypto asset facing a downturn.
Ethereum, another widely watched cryptocurrency, fell about 17% on Monday. The entire crypto market is down less than 1 trillion US dollars this week.
Investors sold riskier assets like digital currencies and technology stocks as the Federal Reserve raised interest rates to combat high inflation.
Monday marked the start of a bear market on Wall Street as the S&P 500 dropped 20% below its previous high in January.
Alex Tapscott, managing director of the digital asset group at Ninepoint Partners, told Global News that cryptocurrencies experienced the same “widespread sell-off” in 2022, affecting the value of assets. Riskier assets include tech stocks like Netflix and Meta.
That trend has “accelerated” recently, he said, as investors look to remove riskier assets from their portfolios.
“Investors are looking to mitigate risk across the board and Bitcoin and crypto assets are being swept away with it,” he said.
What is happening with crypto platforms?
Bitcoin’s latest drop is also partly tied to alarming moves from several major crypto exchanges and lending platforms, who have announced plans to shut down or cut jobs. do this week.
On Sunday, crypto lending platform C Network announced that it will be suspending all withdrawals and transfers between accounts to “respect its withdrawal obligations from time to time.”
C, with about 1.7 million customers and more than $10 billion in assets, gave no indication in its announcement when it would allow users to access its funds.
The Caisse de Đépôt et put du Québec, the provincial pension fund, is one of Celsius’s supporters.
“That has created a crisis of confidence in many other companies in the sector, and people are now wondering how much of a risk their investments can be,” Tapscott said. .
Meanwhile, on Tuesday, cryptocurrency exchange Coinbase announced it was cutting 1,100 jobs, or 18 percent of its workforce. It joins companies including BlockFi and Crypto.com to cut hundreds of jobs amid the collapse.
Coinbase CEO Brian Armstrong said in a blog post The announcement decided that the platform was growing too quickly as it tried to capitalize on last year’s crypto boom and would need to cut costs as it prepared for an economic downturn.
“We look like we are entering a recession after more than 10 years of economic boom. A recession could lead to another crypto winter and could last for a long time,” Armstrong wrote.
What is ‘Crypto Winter’?
The “crypto winter” that Armstrong references in his post usually refers to a stretch of time or months or years in the crypto space when digital assets are falling in value. with very little regard for the entire space.
“It is what it sounds like. Winter weather, cold, cool. Investors don’t want to be in it. Genevieve Roche-Decter, CEO of Grit Capital, says there are more sellers than buyers.
This could be a period when the so-called altcoins that have emerged in the crypto craze of the past few years can plummet and lose all of their value, similar to the dot-com bubble of the late years, she said. 1990.
Tapscott is less convinced that winter has come for crypto.
While there have been previous bankruptcies and slumps across the crypto world, he noted that recent years have seen more interest from institutional investors in the digital asset. number.
Payment processors like Paypal, Visa, and Mastercard have gotten into crypto, and many exchange platforms still have significant access to capital that they weren’t able to during the previous downturn.
“There is a lot of sponsorship. It is quite complex, much more widely organized, has more innovation and is therefore very useful,” he said.
“And I think as a result we’re going to see winters, like it, a little bit less cold and a little bit longer than anything we’ve seen in the past. I think if anything happens it will recover a lot faster this time.”
What should you do with your portfolio?
For many investors entering the crypto space amid the recent Super Bowl ads and highly hyped Reddit thread, it will be the first time seeing the value of their digital assets. decrease.
Roche-Decter says that owning crypto is “not for the faint of heart” and it could be years before assets like Bitcoin return to their former highs, if they ever do.
Bitcoin and other cryptocurrencies have seen huge returns as well as steep declines, and anyone expecting big returns in the space is likely to have a long way to go, she said. he said.
When it comes to making money with your portfolio, Roche-Decter says many young investors can be disheartened to hear that volatile assets like cryptocurrencies are often not the best path forward. front.
“Boredom is actually sexy. The way to make money in the long run is to just stay in the fundamental companies that generate revenue in the up and down markets. And unfortunately, that’s not what that generation wants to hear,” she said.
For investors looking to ride a cryptocurrency roller coaster, Roche-Decter recommends a more limited exposure. An overall portfolio might have 80% safer assets and 20% to have fun in more speculative projects, she suggests.
“I’m not advocating all of that, but you have to keep it entertaining and keep yourself in the game. The rest of it – sleep at night,” she said.
– with files from Anne Gaviola of Global News, Associated Press, Reuters
© 2022 Global News, a division of Corus Entertainment Inc.
