Bitcoin, the world’s first cryptocurrency, recently dropped to $42,000 in an unexpected drop that also impacted major altcoins and cryptocurrency investors.
Bitcoin recently reached an all-time high of $69,000, and enthusiasts were already calling for the next leg up for bitcoin to reach new heights, which is why this dip surprised many investors. The sharp drop in May, when cryptocurrencies lost 47% of their value in a week, was prompted by a clampdown on crypto-trading in China and a tweet by Elon Musk, Tesla’s chief executive, saying that the electric-vehicle maker would stop accepting payments in bitcoin.
BigONE has decided to investigate the reasons for the latest Bitcoin price crash, to understand its longer-term prospects, as well as scope out alternative crypto investment opportunities to enable you to update your trading strategy for 2022.
Cryptocurrency analysts have cited several reasons as the cause of this 20% fall in Bitcoin’s value, including FUD created by Gary Gensler, the SEC chairman, regarding cryptocurrency regulation in the US, the news of a new variant of the coronavirus called Omicron, unease in the markets after the latest US monthly jobs report sent mixed signals about the country’s economic recovery, which
“may have indicated to investors that the Federal Reserve would raise interest rates sooner than planned, lowering the returns on riskier assets,”
according to the Financial Times (FT). In addition, President Joe Biden signing a $1.2 trillion infrastructure bill that contains tax ramifications for cryptocurrency investors in the US may have also played a part. All of these factors could have played a role in this cryptocurrency market decline, but one key factor has gone unnoticed, and it has to do with the influence of traditional financial markets.
The cryptocurrency market, which is typically regarded as an independent market from traditional financial assets, fell in value only hours after a storm in traditional financial assets. Wall Street, the epicenter of the world’s financial markets, experienced a volatile weekly close on Friday, December 3 in response to news of the spread of a new strain of the coronavirus.
Bitcoin’s drop has been traced back to these Wall Street events, which is somewhat surprising given that cryptocurrencies are classified differently than traditional assets. Speaking to the FT, David Fauchier, portfolio manager at Nickel Digital, linked the investors who sold off equities to many of the same people who sold off Bitcoin, causing the price drop so sharply, particularly because crypto is tradeable over weekends, unlike traditional stocks.
The future outlook for Bitcoin investors
Despite this drop, Bitcoin has proven to be highly resilient since its inception, always rising to new highs after each setback. The most recent occurred after Bitcoin reached its previous all-time high of $64,000 around April and fell by nearly 50% in May before recovering and reaching a new all-time high of $69,500 for the first time on November 10.
Bitcoin is currently trading at $49k, having recovered somewhat from its lows of $42k. According to Humphrey Yang, the personal finance expert behind Humphrey Talks, big price dips are nothing to be concerned about, instead, he avoids checking his investments during volatile market dips. “I’ve been through the 2017 cycle, too,” Yang said in a Time article, referring to the 2017 ‘crypto crash’, in which many major cryptocurrencies, including Bitcoin, lost significant value. “I’m aware that these things are extremely volatile and that they can fall by as much as 80% in a single day.”
It’s also worth noting that in many cryptocurrencies a few big investors hold significant sway. For example, in the case of meme coin Shiba Inu, ten wallet addresses hold more than 60% of the total available supply of Shiba Inu. In other words, at least ten people have these wallet addresses, or all of them are held by a few people.
Even the Shiba Inu audit report, available on its website, shows that more than half of its total available supply is stored in four wallet addresses. Therefore, if any of these wallet addresses decides to sell Shiba Inu coins, the market will be seriously affected. While in the case of Bitcoin in 2020, less than 20% of the supply was actually traded with the majority of BTC held long-term.
As a result, trades can have a disproportionate impact on the market.
Based on its performance over the last decade, BigONE believes Bitcoin has the potential to recover from this latest pullback. However, investing in cryptocurrency involves risks, and BigONE thinks everyone should conduct their research before investing in any other cryptocurrency.
According to CoinMarketCap data from early November, there are currently over 13,500 cryptocurrencies in circulation. However, many of these cryptocurrencies are disappearing from the market daily for a variety of reasons. Investing in cryptocurrency can yield extraordinary returns, but it also carries risks, as do all investments.
Therefore, BigONE advises you to only invest in funds that you can afford to lose and to make sure that your crypto assets are part of your overall investment portfolio. You should also spend as much time researching and learning about the cryptocurrency you intend to invest in before making any investment decisions.
Other crypto investment opportunities
BigONE believes investors should take inspiration from the drop in the price of Bitcoin and investigate coins with utility in the growing metaverse market. The metaverse concept is becoming increasingly popular, with tech behemoth Facebook (now Meta) recently rebranding to become a metaverse company.
With the development of the metaverse, we can already see people using cryptocurrency to buy land and commodities in various existing virtual worlds, proving the viability of the “cryptocurrency-metaverse” combination. In 2021, Axie Infinity is one of the best performing cryptocurrencies with its highly engaged play-to-earn user base. So far, it has generated an incredible gain of more than 24,000%, and this play-to-earn game has inspired a slew of similar games.
Players can breed and raise cute and unique Axies, then sell them on the market for large profits. Other metaverse tokens worth a closer look include Decentraland’s MANA tokens which can be used to buy and develop the land.
As reported in Cointelegraph on December 6: “Although Decentraland ranked in second place for the total volume traded, the top 10 most expensive metaverse NFT sales during the past week, ranging from 225,000 MANA ($758,250) to 50,000 MANA ($220,000), were all on the Ethereum-based virtual world. Decentraland traded $6.6 million in volume for 399 assets over the past week.”
Other potential tokens worth investigating include layer-one solutions such as Solana and Fantom and layer-two solution tokens such as Matic, which can be purchased on the BigONE exchange.
Certainly, Solana has been a firm favorite with crypto investors, having risen in value by more than 15,000% on a year-to-date basis. A key reason for this, apart from its fast transaction rate and cheaper fees than Ethereum, is its ability to grow the NFT marketplace. “As we just pointed out, Solana’s low-fee, the high-speed network has proven to be beneficial for NFT investors looking to nab a popular piece of digital artwork,” confirmed a recent report in The Motley Fool.
Committed investors should consider these altcoins that have the potential to become blue chips in the longer term, and this dip is an excellent time to both investigate and acquire these tokens.
#AnndyLian says: “Volatility is built into the way crypto markets operate, which means your crypto position may be great today, but look terrible tomorrow. You should approach investing with this in mind, and sell if you need to and buy again when the time is right for you and your level of risk. Don’t get too stuck on one particular project or token, there are new opportunities opening up with the growth of the metaverse.”
Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author “Blockchain Revolution 2030”.
Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.
An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.