Is the Crypto Crash Finally Over With Bitcoin Back Above $30,000?
- Yesterday, Bitcoin slipped to its lowest point since December 2020, but today it pushed back above $30,000.
- Inflation and other wider economic factors could still push crypto prices down again.
- It's too early to talk of an end to the crypto crash.
Crypto prices may be back in the green today, but we're not out of the woods yet.
It's been a tough week for crypto investors. Disappointing inflation figures sparked market jitters that were compounded by the collapse of Terra's LUNA and its whole ecosystem. Bitcoin (BTC) slipped to its lowest price in 16 months and other cryptos experienced similar drops.
However, there were glimmers of hope this morning with most of the top cryptocurrencies back in the green. At the time of this writing, Bitcoin is worth around $30,500, up 15% from yesterday's low of $26,350. Does that mean the crash is over? Let's find out.
Is the crypto crash finally over?
Many crypto investors have been hoping for an end to the carnage for several months. We've had a few moments like this one where it looked like Bitcoin might have turned a corner, but each time those hopes have been dashed by further bad news.
There is a chance the lead crypto has bottomed out, but it's too way early to call it either way. Before we can seriously talk about an end, Bitcoin needs to not only hold its position above $30,000 but also build back consistently. The Crypto Fear and Greed Index is still registering extreme fear, reflecting the high levels of nervousness in the market. The index uses several factors, including social media trends, trading volume, and volatility, to evaluate market sentiment.
Plus, there are several ongoing issues that could still push Bitcoin's price down again. Here are some factors to keep an eye on:
- Inflation figures: One reason crypto prices dropped this week was that the monthly inflation rates were not as low as economists had hoped. If inflation doesn't slow, the worry is that the Federal Reserve will take even more drastic measures to control it.
- Wider economic and geopolitical factors: The impact of the Federal Reserve's economic tightening has weighed heavily on crypto prices. There are growing fears about a potential recession, which would not be good for crypto.
- Increased regulation: The specter of increased regulation has hovered over the crypto industry for some time. Terra's collapse could cause authorities to act more quickly, particularly in regard to stablecoins.
- Tether's (USDT) wobble: Tether is the biggest stablecoin in the crypto world and yesterday it also lost its peg. The market may have been able to weather the fall of TerraUSD (UST), but it would be more difficult to survive any similar issues with Tether.
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It's not an easy time to be a cryptocurrency holder, especially if you bought crypto for the first time last year. Some altcoins are now worth 50% or 60% of their all-time highs, and there's a lot of uncertainty about when -- and if -- prices will recover.
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Last year when prices soared to extraordinary highs, there was a lot of extra cash floating around as governments attempted to avoid pandemic-related economic disaster. Now, authorities are pulling back those stimulus measures and the environment is much more risk-averse.
A lot of experts online argue that now is the time to buy. They quote Warren Buffett who said, "Be fearful when others are greedy, and greedy when others are fearful." That's all very well if you have money to spare and are confident of crypto's long-term performance. But bear in mind that Buffett recently said he wouldn't buy all the crypto in the world for $25. There's no point in buying something on sale if it's not something you actually want and believe in.
Cryptocurrencies are high-risk investments and there is a lot of uncertainty about how they will develop. Last year showed us that some can generate extraordinary returns, but this year showed us they can produce huge losses as well. Do your research and make sure you understand the potential benefits and risks of crypto investing. If you decide to buy crypto, be sure to only invest money you can afford to lose and make sure it's part of a wider investment plan.
But for many, it isn't a question of buying more -- the real challenge is avoiding panic selling. The temptation to cut your losses is completely understandable, especially after watching LUNA's collapse. However, if you still believe in the long-term viability of your crypto holdings, selling now will only lock in your losses. Keep your eyes on the long-term potential and hold on to the reasons you originally invested. If you sell at a low point, you won't be in a position to benefit from any future rallies.
It's much too early to know whether the crypto crash is over. It is only one day since Bitcoin hit its lowest point since December 2020. We are still in a period of extreme uncertainty and there are a number of elements that could prolong this crypto dip. If you're a buy-and-hold investor, it may help to view the current drops through a long-term lens. Up until now, Bitcoin has always recovered from even extreme price dips eventually, and many predict it will do so again.
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