Crypto experts shrug their shoulders from the bitcoin crash, here’s the reason

by James · July 9, 2022

Nevertheless, long-term investors are shrugging off the extreme falls in the value of digital coins and the collapse of the stock markets that are making them available to investors.

Bitcoin, the world’s most valuable cryptocurrency, fell to close to $ 21,000 on Wednesday. It has lost a quarter of its value since Friday and is almost 70% below the $ 68,000 per coin high in November. Ether, the second most valuable digital currency, has lost about a third of its value since Friday and has fallen 75% below its peaks.

More worrying are the structural problems that make it impossible for investors to withdraw their money from crypto exchanges. Binance, the world’s largest cryptocurrency exchange, suspended withdrawals for a few hours on Monday, saying some transactions had stalled. The Celsius Network, which has 1.7 million users, has temporarily suspended withdrawals due to “extreme market conditions.” They did not say when they would reopen the exchanges, and only indicated that it would “take time”.

It’s just June. The winter is coming.

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So far no one was able to send in the perfect solution, which is not strange. They say that this is in line with the price, and that a bear market in crypto is not the same as a bear market for stocks: the lows are more extreme, but so are the highs.

“Crypto bear markets typically pull down between 85% and 90%,” said Jason Yanowitz, co-founder of Blockworks, a research platform for crypto investors, executives and builders. Over the past decade, two long periods of cryptocurrency decline have seen bitcoin lose more than 80% of its value, but the coin came back – and a little more.

During the 2017 to 2018 cryptocurrency market, bitcoin fell 83%, from $ 19,423 to $ 3,217. But in November 2021, the coin was valued at $ 68,000.

During the same period, etherium fell from $ 1448 to $ 85, a decrease of around 95%. In November 2021, the coin was valued at $ 4850. The bear market between 2013 and 2015 also saw bitcoin fall around 82%, from $ 1,127 to $ 200.

“If you bought [bitcoin] at the top of the 2017 beef race (around $ 20,000), you saw an 80% decline over the following year. But if you continued to hold, you would be up almost 60% right now – even after the crypto market’s last downturn from all-time highs in November, said Felix Honigwachs, CEO of Xchange Monster.

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Given how new the crypto is (it started in 2009), Yanowitz said, it is naturally more volatile. He points to Amazon (AMZN), whose stock price peaked at $ 113 per share at the end of the internet boom of the 90s before crashing 95% to $ 5.51. It closed Tuesday at $ 102.31, but before the 20-1 share split took effect on June 6, it traded well over $ 2,000 per share.

“I really disagree with people who say there is no way to recover from something like that,” Yanowitz said. “I think people look at crypto and think it’s weird or that it’s not real. If you do not think crypto is real, you probably think it’s overrated.” But this downturn is nowhere near as bad as the recent crypto bear market, he added.

Other technology stocks are down significantly right now, he said, not just cryptocurrencies. Shares of Uber (UBER) has fallen over 50% so far this year, Lift (LIFT) is down 67% and Netflix (NFLX) has fallen almost 72%.

Nevertheless, there are major concerns about digital currency. Fewer investors were exposed to the steep fall of crypto during the recent downturn, so more are now about to lose money this time. Some new crypto-affiliated companies may also falter during the downturn in this crowded crypto market, but coin values are likely to rise again in the long run, said John Browning, co-founder and CEO of BAND Financial in a note on Tuesday.

As Warren Buffett famously said, “It is only when the tide goes out that you learn who has swum naked.”