Massive Drop Leads to Big Questions About the Future of Crypto

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Plummeting values for cryptocurrency have left investors devastated. While crypto has been a somewhat volatile and shaky investment since its inception, the President Trump years provided some significant gains and reliable growth. All that changed with new laws regarding the oversight of the currency, and the near demand to be involved in it by the US government.

With this plummet has come a huge loss in the market value. In November of last year the market cap for the industry was $3 trillion, and just recently kissed just below $1 trillion. This kind of loss is astronomical, and not something they can easily withstand. Somewhat fortunately, the loss has come from across the industry, and not just from a specific currency or two. While the survival of the fittest is partially to blame for this decline, the close relationship between the most known crypto, Bitcoin (BTC), and other coins is nearly in sync.

BTC was able to reach $70,000 a coin last year, and while there many speculated that $100,000 a coin was not out of reach. With values currently hovering around $22,000 that speculation now looks like a long-forgotten goal. They aren’t the only coins to face this plummet either. Ethereum (ETC), and Solana (SOL) have suffered similar fates by percentage. Some are starting to gain back these losses, and in some cases are posting gains.

Much like certain stocks, there are exchange cryptos that are designed not to go up or down much in value from day to day. So when there was a collapse of the Terra network, it was devastating to the market as a whole. Their network featured two coins specifically designed to trade from USD at $1 a coin, the loss of these cryptos played a major role in the loss of value in the market.

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These drops have been more closely linked with the prices in the stock market during the plunge of 2022 than in years past. This ever-increasing rate of similarities has left many investors shocked. Bruno Macchialli, CEO of Delchain, sees this as a result of the growth in the number of investors in crypto, and the number of exchanges performing crypto transactions. “We’ve seen main players — financial players, U.S. companies getting into the crypto world. So I think it’s not illogical that we start to see a behavior that is maybe equal to what’s happening in the traditional market.”

The Fed is raising interest rates and boosting borrowing costs to try and curb inflation. This devalues stocks and other financial assets that are seen as riskier investments. Given the decline in business earnings and the harsher costs for businesses borrowing money, they have a good reason to be considered riskier assets. As a result, crypto is paying part of this price as well.

A downswing like this isn’t all bad though. Just like the stock market, any industry with major growth needs a chance to correct itself and become better established, with a more firm basement price. Macchialli claims that this kind of a bear market can help eliminate the coins that are not built to last, and a collapse like this is just a part of the industry.

Macchialli went on to explain in better detail “The ones that are remaining are the ones that are having a real utility model based on…on something that they are proposing and that investors are seeing something positive based on strategy or willingness.” This kind of confidence is exactly what the remaining coins need.

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