Is Crypto Dead? Or Is this Normal?

Have you heard the doomsday claims that the crypto market is dead? The headlines proclaiming the collapse of the cryptocurrency boom seem to be everywhere these days, citing the ongoing bear run as evidence of the end of the crypto era.

And it's not all just hype. The numbers speak for themselves - crypto assets lost a staggering 63% of their value in just 11 months of 2022, plummeting from a market cap of $2.30 trillion to a mere $844 billion, losing over $1.35 billion in the process.

To put this in perspective, that's more than the combined market cap of two mega-giant companies, Amazon and Tesla. It's enough to make you wonder - what happened to the future we were promised?

But let's not jump to conclusions just yet. To truly understand the whole scenario, we need to dig deeper.

Why were Crypto Prices Dumped?

Cryptocurrency markets are notoriously known for being highly volatile and relatively small in comparison to traditional financial markets, hence they are often classified as high-risk assets. Most investors put their money into crypto with the sole purpose of profiting from bullish momentum.

Now the question you might ask is, why the momentum took a detour? Simply because of inflation and tight monetary policy. To counter the ongoing inflation, US Fed increased the interest rates for taking the loan, which caused turbulence in approximately all the markets. During such uncertainties, investors are prone to invest in less risky assets, such as bonds.

Another reason which led to this stupefied downturn is the collapse of Terra luna and FTX’s bankruptcy within the crypto space

Crypto is dead, many times now

It is not the First time that crypto has succumbed to these monetary injuries. There have been times when crypto markets have nearly evaporated their entire wealth. Let’s understand their timelines one by one.

First Crypto Crash

Bitcoin was introduced in a 2008 whitepaper by an anonymous author using the pseudonym Satoshi Nakamoto. The concept quickly gained popularity among tech enthusiasts and those seeking to reform the global financial system.

However, Bitcoin faced a significant setback when it experienced a major collapse. Over a period of five months between June and November 2011, the market capitalization of Bitcoin, which constituted the entire cryptocurrency market at that time, decreased by more than 90%.

Second Crypto Crash

In 2013, the digital currency landscape saw the emergence of alternative coins such as Litecoin, Namecoin, Dogecoin, and XRP, which diversified the market. However, this period was challenging. Notably, the closure of Silk Road, a popular dark web platform that accepted cryptocurrencies as payment, by the FBI.

In addition, China's ban on Bitcoin and the hacking attack on Bitstamp, a major crypto exchange, added to the negative publicity surrounding the industry. These developments resulted in a bear market that persisted for over a year and led to an approximate 80% reduction in the total market capitalization.

Third Crypto Crash

After a slump in the digital asset sector in 2015, there was a significant increase in investments and technological advancements. This led to the emergence of Ethereum, the first-ever smart contract platform, and Tether stablecoin.

However, by late 2017, the launch of several crypto projects through initial coin offerings (ICOs) resulted in numerous fraudulent activities that drained millions of dollars from crypto investors. Notably, high-profile cases such as Bitconnect and the CoinCheck hack, which resulted in a $530 million loss, caused a year-long bear market with investors suffering significant losses of up to 80%.

Conclusion

Here is the catch, In 2008, when Lehman Brothers collapsed, it had a domino effect on the financial system, ultimately leading to the global recession. Similarly, the 1992 Harshad Mehta Scandal shook the entire stock market of India, resulting in a bear run in real estate and equity markets, where the majority of people lost colossal wealth.

But here we are now, did those markets die with the crash? No, instead they flourished and become even more stronger and transparent.

Then, why be harsh with crypto markets? These markets are relatively younger and sensitive to external factors. There is still much development required for these markets to mature fully. Considering the dead on the basis of one crash is not wise.

So, let's keep an open mind toward these new technologies that have the potential to transform our world. And we must also remember that no market is invincible. They are prone to setbacks and crashes.