Opinion Bitcoin and the Crypto Markets on the Precipice of a Huge Drop

Bitcoin and the Crypto Markets on the Precipice of a Huge Drop

May 27, 2022

There is an uneasy sense in the air when it comes to cryptocurrencies. That sense has to do with the fact that the markets have been in a state of almost constant turbulence for more than a month. In that period, all of the tokens slid down drastically and took away some 500 billion USD from the combined market cap. That is influencing some analysts to examine a further drop in value that could be even more drastic. Some believe that the target of 8,000 USD for one BTC token could be a realistic possibility if the worst scenario begins to unfold. The fallout of a slide so drastic needs no explanation when it comes to the drain on the market cap that this would kickstart.

Also, the same turbulence would not only spread across the whole crypto market, but almost certainly euthanize some struggling networks and outright kill some others. However, no matter how apocalyptic that scenario might seem, the chances of the black March of 2020 happening again seems to be very much on the table. That is cause for concern not just for the smaller investors like esports players or other ordinary individuals interested in blockchain tech, but even the biggest crypto whales and institutions that hold these digital assets.

Four-Digit Realm

The current situation on the crypto market is colored by the fact that the 30,000 USD mark has been broken consistently over the past several weeks. That is why the point of over 70 percent of loss is what many see as the ultimate bottom. More precisely, that will be the range of 8,000 USD. The space for the downslide is huge mainly because of the Fed and its likely movies in the coming period. Most see that strategy as very restrictive and that should impact the crypto prices. That would include the US Federal Reserve increasing the interest rates and also tightening the overall monetary policy.

There is a strong sense that the same would effectively push bitcoin price down and then place it in a tailspin that will only lose steam well below the 20,000 USD mark. For now, that is the big psychological barrier and there are hopes that it could be the first big bulwark against the ultimate bottom. But, as things get tougher and there is a lack of any positive news in the domain of global geopolitics and the world’s economy, the downslide appears to be almost certain.

Survival of the Fittest

The incoming loss of value in the crypto market seems to be a big event for the numerous altcoins that have saturated the market. However, the key issue here is the fact that most of them are complete junk in any meaningful sense, apart from blind casino-like pumps and dumps. Even now, the recent development saw devastation of certain blockchains.

Among them is Terra and its Luna token, which took a catastrophic downturn in the past weeks. Other networks will take a similar route if the bitcoin price takes a huge tumble. Of course, analysts are in agreement that networks like bitcoin and ethereum will survive. Others will not and the Terra example shows that this is not some kind of a far-flung possibility. It will not potentially happen in years from now or because of some unforeseen government intervention of a huge security issue similar to the Mt. Gox fiasco. Instead, it is already happening in the present day, while many more projects wait right below the same crypto gallows.

Bubble Time

Once more there are comparisons to the present situation in the crypto market and the dotcom bubble. It took place in the early 2000s and it was also directly related to the internet and websites, especially their first massive iteration of Web 1.0 services. At that moment, many believed without any doubt that things like America Online and Yahoo were the big winners at that moment. However, the true winners were things like Pets.com and Amazon.

These were also present back then, but both companies were far behind the success and exposition of businesses like Yahoo. There is a good chance that a similar dynamic is in play in the case of the current crypto bubble. It is not something that is going to collapse in its entirety, but the incoming crisis will likely weed out many networks, including those that might seem super-stable and successful at the present moment.

Definition of a Currency

On a much more in-depth level, the cryptosphere has a problem of value as a concept as much as it does when it comes to its volatility. Any currency, digital or fiat, needs to be able to store value, act as a medium of exchange, and provide a unit of account. While crypto does this in some shape or form, it still does not fulfill the benchmark of quality for these individual elements. The bitcoin’s ability to store value, for example, is so skewed by incredible volatility that the same features play almost no day-to-day role for its holders. No one is using their BTCs to buy groceries or pay for transport, even when such payment processing ability exists at particular vendors.

El Salvador is trying just that at the current period but the successes of that experiment will take years. The problem is further exacerbated by the fact that so many officials will be quick to point out that cryptocurrencies are either worth nothing or have some other inherent issue. Because of that, they are more than happy to, through their public appearances, derail any chance of cryptocurrencies gaining some traction on a higher level. That hesitancy of the general population is in part what allows for these massive slides in value to take place. For the upcoming crisis, crypto can count that it will be on its own. Any process of climbing out of the hole that the crisis creates will thus be likely to be long and difficult.