Crypto-prices may be in for another big crash, with an expert predicting “It will be scary”
Beware of crypto investors: Experts say there may be at least one more large cryptocurrency on the horizon.
Bitcoin, the world’s most valuable cryptocurrency, fell below $ 20,000 this week, and continues to hover close to $ 19,000 – almost 70% below the high of $ 68,000 in November.
This is the second time in recent weeks that bitcoin has fallen below $ 20,000, a price point that remains central while experts discuss whether it will see further falls like in 2013 and 2017, when it fell 85% below the highest. Ethereum, the second most valuable digital currency, has lost more than two-thirds of its value since November and continued to hold over $ 1,000 on Friday.
And things can get even worse now that the price of bitcoin has fallen below 20,000 dollars again, experts say.
The crypto market may experience another drastic sale before it is on the road to recovery, says Edward Moya, a senior market analyst at brokerage firm OANDA – with bitcoin falling closer to $ 10,000. Ethereum could fall as low as $ 500, a further 50% drop from today’s price, says venture capitalist Kavita Gupta.
“It seems like everyone is becoming a snowbird and avoiding this crypto winter,” says Moya. “If the Wall Street massacre remains the topic of the third quarter, bitcoin could be vulnerable to yet another ugly fall that could cause many traders to fear a fall in the $ 10,000 range.”
Will there be another cryptocurrency?
Many experts say that another “crypto winter” is already underway. Between a collapse in the market, layoffs and the ongoing liquidity crisis in the crypto industry, experts say that crypto prices are likely to remain low for the foreseeable future, as they did. between early 2018 and mid-2020.
And while some experts say we’ve hit rock bottom, the majority of experts we’ve talked to say that cryptocurrencies are likely to fall even more in the coming weeks or months. They point to how previous bear markets have looked for crypto – which experienced 85% corrections from all-time highs – and new concerns that the macroeconomic environment may get worse in the future.
In addition, crypto companies have laid off employees, frozen withdrawals and tried to reduce losses, which has raised questions about the health of the industry. It started with the implosion of Terraform Labs in May, but the crypto bear market has affected other companies since. Coinbase, the largest crypto exchange in the United States, announced in June that it had cut 18% of its employees, following layoffs at other crypto companies such as Gemini, BlockFi and Crypto.com. The crypto bank Celsius stopped abrupt withdrawals in recent weeks due to “extreme market conditions”, and the crypto hedge fund Three Arrows Capital may face liquidation.
The alarm bells went off especially this week after bitcoin fell below $ 19,700, and so far has stayed below $ 20,000. Crypto expert and educator Wendy O says that bitcoin can now potentially fall below $ 17,600, and if that happens, “it will be scary.”
Bitcoin has not yet tested the $ 19,000 level again as resistance, but if it does and falls again, it will be “a very bearish signal”, according to Marcus Sotiriou, a market analyst at GlobalBlock, a digital asset trading firm . Resistance is the level where demand is not strong enough to stop an asset from falling further, and support is the opposite.
“This is because it would be the first time that this level has been broken in a long time frame and may indicate that an expanded bear market is on the horizon,” says Sotiriou.
What investors can do to prepare
The crypto market has crashed before, and it will probably crash again, so it is important to be clear. Cryptocurrencies are notoriously volatile and risky, so investors can see market fluctuations of more than 50% over months and as much as 15% price gains within 24 hours.
In moments of extreme volatility and uncertainty in the crypto market, here are things you can do to protect your finances:
1. Prioritize budget, debt and savings
Before investing in crypto, make sure you feel confident in your budget, debt and savings. Having a solid budget and contingency fund can give you the peace of mind of knowing that you can still achieve your financial goals and help alleviate the stress you may feel with your investments.
The amount you should have saved in an emergency fund – cash in an available high-yield savings account – is open to debate, but most experts say that at least 3 months of spending is a good starting point. If you do not yet have a well-stocked emergency fund, do not buy crypto, and instead start putting a small amount aside each month until you do. Together with an emergency fund, experts say that you should have a conventional pension savings strategy in place and that you should not have high-interest debt.
2. Diversify your investments
It is a good idea to take a few steps to protect your investments from the whims of the market. The best way to do that is to diversify what you invest in. Crypto should only take up a small portion of your total portfolio of stocks, bonds and mutual funds to help you reach your long-term financial goals.
If you are thinking of investing in crypto, experts say that now may be a good time to enter the market while prices are low, but keep in mind that prices may fall even more. When it comes to which cryptocurrencies you should invest in, the majority of experts recommend sticking to the most established cryptocurrencies: bitcoin and etheruem.
Invest what you want to lose
You should have a high risk tolerance for investing in crypto, and you should only invest an amount that you are okay with losing. Experts suggest following the 5% rule – that is, do not contribute more than 5% of your portfolio to risky assets such as crypto. As with any new investment, it is important to do research and understand all the risks associated with cryptocurrencies.
