Updated on July 23, 2024
The cryptocurrency market is arguably one of the most volatile financial markets, with its astronomical highs and depressing lows making former enthusiasts wonder: is cryptocurrency dead? In previous years, crypto enthusiasts became overnight millionaires, causing a great frenzy as more and more expected the same windfalls.
However, it didn’t take long for the market to turn on its biggest advocates. This year has been particularly tough for crypto traders as the market continues on its downward trend. What started out as a whisper around Wall Street is gaining traction and becoming a common catchphrase as investors continue to stalk the halls with questions like: is crypto dead? Was it just a fad?
So, the question remains, is crypto dead? Short answer; No! Cryptocurrency might be going through the trenches at the moment, but it is far from being a complete loss. However, it might help to consider the reasons for thinking crypto is dead:
FTX crash
FTX is the exchange on which cryptocurrency trading takes place. Ordinary people are given the opportunity to trade crypto through the FTX without having to set up wallets manually. As many crypto investors began to sell off their assets in droves, the FTX initially resisted the chaos and previously even made bailout offers.
FTX crashed as a result of bad gambles made by Bankman-Fried’s Alameda Research, which made risky bets using FTT- a currency created and operated by FTX. When many FTX investors whose assets were stored in FTT heard the news, the panic sell-off led to the inevitable crash of the exchange.
Domino effect
Following the crash of FTX, cryptocurrencies traded on other exchanges followed suit. BlockFi, Genesis, Kraken crypto exchange, and others began to face the effects of the FTX crash.
Cyber Hackers
Crypto exchanges and assets are repeatedly victims of cyber hackers. As a result of the fact that the technology is fairly new. Highly motivated cybercriminals look for every way possible to hack into big exchanges to hit the jackpot. For instance, in August 2021, hackers stole $600m worth of crypto through an attack directed at the Poly Network. Given the current economic climate, few investors are willing to risk their hard-earned money on platforms that are too decentralized to guarantee the recovery of funds in case of theft.
Inflationary measures
The final nail in the crypto coffin came on the heels of the Federal Reserve’s efforts to curb inflation. With increased fear among investors regarding the state of the economy, fewer of them were willing to keep their money in risky investments like crypto and instead began moving their cash to safer investments.
Despite this, cryptocurrency offers investors several advantages, proving that the market is still worth investor trust and attention.
Decentralization factor
The cryptocurrency market is still the financial market that is not under government control. There isn’t another financial market that enjoys the level of autonomy and anonymity offered by crypto. This is a big deal because crypto investors do not face the same high rates, fees, and regulations that govern other markets. This has made it a great option to get in as a small player and reap big benefits.
Volatility = big wins
Although most investors run in the opposite direction at the sight of highly volatile markets. Some have seen the benefits of placing big bets in such a space. Crypto’s earliest enthusiasts cashed out big and reaped returns previously unseen since the dot.com boom. For these lucky investors, crypto is far from dead; indeed, the industry is just warming up.
Diversification
Cryptocurrency is a great way to diversify your portfolio. Many believe it has a minor correlation to traditional investments such as stocks. For instance, it has been supposed that crypto correlates 0.03% to the S&P 500 index. One of the fundamental reasons for this is that the currency is highly decentralized. Unlike stocks and bonds, these currencies are spared the effects of government policy, inflation, and other microeconomic factors.
In conclusion, the question of whether crypto is dead depends on how determined an investor is to see their investment score returns. Although the investment class might seem unappealing to many at the moment, its enduring attributes, such as diversification, decentralization, and potential for big wins, are evidence that the future is still bright for the market.
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