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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 in reference to stocks, the crypto winter will end.
Or will it?
Finance experts and retail investors alike are wondering:
- Will crypto survive a crash?
- Can crypto bounce back?
- Is the crypto market recovering?
Let’s explore some of the factors driving down the price of Bitcoin, Ethereum and altcoins (any cryptocurrency other than Bitcoin) right now and whether or not the crypto market is poised for a recovery anytime soon — if at all.
How Bad Is the Cryptocurrency Crash?
In the past year, between July 27, 2021, and July 11, 2022, Bitcoin has fallen nearly 24%, according to Coinbase. Its current value of $23,452.55 as of July 19 is roughly 36% less than its December 2022 price of $64,912.20 per coin.
Likewise, Ethereum is down more than 13% from this time last year, and it has lost more than 32% of its value since its peak.
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The other altcoins tend to follow Bitcoin pricing trends, and as Forbes Advisor noted last month, the global crypto market has dropped about 60% since November of last year.
However, following suit with the stock market, which saw some modest gains in July, crypto is also creeping up. Coinbase showed Bitcoin with a 21% increase in the second week of July. But that doesn’t mean we can all breathe a sigh of relief that the crypto crash is over.
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.
The most recent crypto winter occurred from January 2018 to December 2020, Forbes Advisor reported. 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 as long as you are willing to hold for a 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.
Is the Crypto Market Recovering?
The recent rise in crypto in mid-July, coupled with other positive economic indicators that could indicate a slow turning of the bear market, could indicate a crypto recovery on the horizon. And it may happen faster than many believed would occur.
An unexpected boost in retail spending in June 2022, along with the Federal Reserve projecting an interest rate hike of just 0.75% rather than a full point at the next meeting, bode well for the economy. And since the crypto crash is related to these kinds of macroeconomic factors, crypto could, in fact, be in the early stages of recovering already.
Will Crypto Survive a Crash?
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 is tied to the value of the U.S. dollar. But Terra dropped from more than $50 billion to virtually worthless in one week, the Guardian reported. With this event, other stablecoins also began to lose value and then Bitcoin, as well, 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.”
The crypto market has bounced back before, and if the stock market can be referenced as an example, it is likely to rebound again.
Will Crypto Ever Go Back Up?
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?
It’s highly likely that many coins will 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.
Information is accurate as of July 19, 2022.
Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.