The cryptocurrency market has increased within the last few years and has achieved its highest value in 2021. However, no market is isolated from the world economic scenario, and before thinking about starting your investment, understanding the value and why you are investing in it must be your first step.
Digital currency investors have faced some instability in the business of crypto. It raises many questions about whether crypto is a good investment or not. Some feel nervous about the world market since cryptos are not isolated from other businesses.
On the upside, crypto is not as isolated as you might think. Slowly but surely, adoption is increasing, and today one can use crypto in everything from buying goods and services, to placing a bet on NFL picks, sending money abroad, and much more.
Recovering from Losses
Economics used to be simple; stocks are small parts of larger corporations, and dollars and euros are currencies deeply related to the economies of several countries. They are bound to the real world.
On the other hand, there is no market with such a level of abstraction as crypto. While regular currencies are supported by decisions of Central Banks, cryptocurrencies have nothing to do with anything in the physical world. Everything is operated virtually by a secret algorithm, and this makes cryptocurrencies exceptional when it comes to the future of economics.
In 2021, the value of one Bitcoin peaked at close to $70,000. Then began a crisis that reduced the value of some cryptocurrencies by 50%, which is the case of Bitcoin for instance.
At this time, the market felt insecure and questionable to say the least, losing about 20% of its total value in a single day. It proves to be one of the most volatile markets. In this case, the investors impacted the most were the ones who did not diversify their investments.
What’s to Come?
Facing an increasing list of things you can do with cryptos, it is important to consider that many changes in the market are strongly related to technology, and it is the main reason behind the ups and downs of cryptocurrencies.
Initially, the role of crypto was serving as payment for miners on the blockchain. Now they can be used for several purchases as well as for general consumption and services. This resulted in the emergence of companies that accept cryptocurrencies as payment, cryptocurrency investment funds, and many other opportunities for digital currencies to grow in the market.
Regulations May Be Ahead
During this most recent crypto turn down, known as a bear market, many people who were adamantly opposed to any and all forms of regulations in the world of crypto have started to change their minds.
There are also rumblings in the US regulatory houses that some form of oversight and control over the crypto markets might arrive soon. This is something that is welcomed by some, and feared by others. Regulations might make cryptocurrencies more stable for the average investor, but true crypto enthusiasts may feel that this will kill the entire purpose of crypto.
But after instances such as the de-pegging of Luna and the subsequent collapse, where it turned out that the developer most likely made it out with millions of dollars, lawmakers and officials might have little to no choice when it comes to their decisions to impose regulations on the crypto markets.
However, nobody is able to tell for sure what the future will hold, or even what the results of coming regulation might be even if lawmakers around the world decide to implement them.
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