The ever-volatile cryptocurrency market has been particularly cruel in recent weeks, with the whole digital currency market losing approximately $400 billion in value in the previous week.
Cryptocurrencies have taken a beating in recent weeks, with several of the most well-known names in the industry falling. Bitcoin’s (BTC) price has decreased about 50% since April, Ethereum’s (ETH) worth has been down by around 53% since May, and Dogecoin’s (DOGE) price has dropped nearly 60% in the last six weeks.
Downturns in the stock market are usually nerve-wracking. However, even the most volatile stocks do not always collapse as quickly or as harshly as cryptocurrencies. Even after reports that a big Bitcoin mining facility in China was ordered to shut down, some financial experts remain hell-bent on the crypto market. Bitcoin fell below $30,000 earlier this week for the first price since January, before rallying.
Should you be concerned about the current crypto market meltdown if you’ve invested (or are considering investing)? Here’s a few fact you need to know about it.
What Is Causing the Crypto Market to Crash?
Cryptocurrencies have always been a risky investment, and it only takes a small amount of bad news to send prices plummeting. Elon Musk’s statement in May that Tesla will no longer accept Bitcoin as a form of payment was one cause.
Afterward, China started cracking down on bitcoin mining, sending cryptocurrency values further lower. The IRS then announced that it was becoming more aggressive in collecting taxes on cryptocurrencies, possibly contributing to the crypto meltdown.
Cryptocurrencies are also volatile due to the fact that they are very speculative, and many investors are still undecided about them. Nobody knows if Bitcoin will be around in a few decades, and as values start to decline, worried investors are more inclined to panic-sell, causing prices to fall even further.
Is It Necessary to Be Concerned Right Now?
Although this most recent drop can be frightening, the good news is that cryptocurrencies have seen similar crashes before. It is no news that Bitcoin has lost more than 80% of its value several times, but it has always recovered. Even though Ethereum lost nearly 95% of its value in 2018, it was able to recover.
While previous performance of these cryptocurrencies does not guarantee future results, the largest names in the crypto sector, including Bitcoin and Ethereum, have proved that they can endure volatility. Again, this isn’t a guarantee that they’ll always rebound, but both of these cryptocurrencies have survived much worse.
The key to growing wealth, as with any investment, is to hold your investments for the long term. Cryptocurrency is still establishing its foothold, and even if it does, mass adoption could take years, if not decades.
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Conclusion
If you sincerely believe in cryptocurrency’s long-term potential, it is the ideal reason to invest. If you believe it has a promising future, you should be willing to hold on to your investments for as long as possible, regardless of any short-term volatility.
Cryptocurrency will almost certainly see many more crashes in the future. It doesn’t matter how it’s functioning right now as long as you stay focused on its long-term potential.
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