bitcoin

Written by Robert Steinadler 4 months ago

The market is down again - Is the recent Bitcoin crash healthy?  

A crash can always happen in any market and it is usually a very rare event. That is not the case with Bitcoin as crashes are events that happen quite regularly. Unlike in the stock market, Bitcoin and other crypto-assets are crashing on a regular basis and usually not without a rally that is going on beforehand.

This leaves us with the question of whether a crash is a good thing in some respects or not. Bitcoin is down almost 51 % from its all-time high. Is such a loss inevitable?

The market moves fast and hard

The crypto market is known for one thing: Its volatility. Meaning that all the assets can move in a short period of time within a huge price range. That creates a lot of opportunities and many investors dream to become a crypto millionaire by investing in crypto projects that see 100x or more in return.

If the market grows in a short time, it prepares the stage for brutal sell-offs. The reason is simple. Many crypto projects start with seed funding or some sort of ICO to raise capital. That means that there are a lot of investors involved who bought at a price that was drastically lower than the all-time low in the secondary market.

While it is true that tokens often carry the risk of early investors pushing the price down to realize gains, this is not the case with Bitcoin.

Not the first crash

The market moves in cycles. This is at least one theory of how to read the price movement of the last 9 years. In December 2013 Bitcoin peaked at around 1.300 US-Dollar only to come crashing down to 393 US-Dollar within days. In December 2017 BTC peaked at around 20.000 US-Dollars and kept crashing into February 2018 when it reached a temporary low of 6.100 US-Dollar.

It seems that we have witnessed another crash very similar to the rallies that we have seen before. Bitcoin is a highly speculative asset, which means that good news often carries it to new highs and bad news can crush it down to the ground. Remember what happened when Elon Musk announced that Tesla is accepting Bitcoin? Those were the good times, right?

But when China bans Bitcoin or the Fed is going to change its lax monetary policy things can get very difficult within only a few weeks.

Will Bitcoin vanish?

The past movement of the market is in no way a guarantee that it is going to behave in a similar fashion in the present situation. But it is also a fact that if you would have bought the previous top in 2017 you would be still doing well despite the current situation.

A lot of companies and even a whole country is building on Bitcoin. El Salvador, MicroStrategy, and even Jack Dorsey working full time on Bitcoin are good indicators that it is going to stay a while longer. While it is hard to predict where the market is moving in the future it is safe to say that a crash is no reason to think that Bitcoin and the crypto market are going to vanish.

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