2022 has been a roller coaster ride for cryptocurrency markets. The market-cap cryptocurrency market has grown from its peak of $3 trillion to nearly $800 billion, in the space of just one year. Most of the top performing cryptocurrencies have turned red and are seeing double-digit losses. Crypto investors are on a major selling frenzy and sitting in tight positions, which means downside all around.
Bitcoin, the largest currency in the world, reached an all-time high of $69,000 in November 2021, then reached levels of $47,000 in January 2022, now trading below $18,000, after the fall of FTX . Similarly, Ethereum, which was at its all-time high near $4900 in November 2021, has now fallen below the $1300 levels.
Why is the cryptocurrency market moving on a downward trajectory, what is driving it? Let’s dig deep through this read.
The Crypto Market Continues to Plunge
The entire digital currency market has turned bright red and shows no signs of cooling anytime soon. In fact, there are few digital coins and tokens, which have fallen worse than others.
FTT, the native token of FTX was the backbone of the FTX exchange, hit rock bottom amid the FTX scandal. FTT, which was seen at $26 on September 1, 2022, is trading today at its lowest around sub-$1. Other currencies such as Solana (SOL), nicknamed “Ethereum Killer”, also suffered the worst fall. Solana was trading at $37, its three-month high on November 6, 2022, which has now bottomed out at $12.
Other altcoins such as Filecoin (FIL), Storj (STORJ), Decetraland (MANA), Apecoin (APE), Flow (FLOW), have fallen by an average of 20-40% since November 2022.
The two biggest currencies by trading volume and market capitalization, Bitcoin (BTC) and Ethereum (ETH) saw a massive drop following the massive FTX crash. Bitcoin is now trading near its low around $16,000 and similarly ETH, which hit its yearly high around $4,900, is now trading at $1,200 as of December 20, 2022.
In contrast, Ripple (XRP) and Binance Coin (BNP) are not struggling as much, but they are down almost 9% and 7% respectively. Tether (USDT), USD coin (USDC), Dai (DAI) and TRON (TRX) are among the top gainers on December 20, 2022.
Reasons Behind Crypto Collapse In 2022
The cryptocurrency, known for its extreme volatility, has had a tumultuous time in 2022. The main reason for the market slowdown is the downfall of one of the world’s largest cryptocurrency exchanges, FTX. The bankruptcy of FTX and its spat with Binance not only triggered a huge sell-off in the market, but also reduced liquidity in the crypto market.
Binance, the world’s largest global cryptocurrency platform, was ready to buy rival FTX, but quickly backed away from the proposed takeover deal, citing multiple issues with FTX’s finances and regulatory investigations. Binance’s move stunned crypto investors and dropped Bitcoin to a two-year low, which touched $69,000 in November 2021.
This surprising turn of events has led to a turmoil-like situation in the crypto industry, which has resulted in a high level of mistrust and skepticism among investors towards centralized crypto establishments and on the regulatory front.
The FTX contagion effect is quite obvious, several questions have now been raised about the survival of other trading and lending companies such as Gemini, Coinbase. Experts believe that their survival depends strictly on their regulatory, governance and management practices.
Besides the sudden fallout from FTX and its contagion effect, rising interest rates and the recent hawkish tone of US Federal Reserve monetary policy tightening have also added fuel to the fire.
Is it safe to invest in cryptocurrency right now?
This is not the first time that Indian cryptocurrency investors have seen such extreme volatility. Whether it’s the Terra-Luna crash, the Russian-Ukrainian war, the new crypto tax regime, and now the collapse of FTX, investors are learning every day to deal with such situations and are demanding better rules for operational transparency, governance and regulations in place.
The series of consecutive unfortunate events over the past year have had a considerable negative impact on the sentiments of Indian investors. Investors are now playing more cautiously and noting that the digital assets they have invested in are sufficiently transparent or if they have been used as collateral.
After the consequences of FTX, it is highly recommended to always invest in something that you fully understand and is regulated. Whether buying dips or waiting for the market to correct, it is prudent for crypto investors to take the FTX situation as a red flag and invest in the crypto market -currency only after thorough research. It is also recommended to invest only 5-10% of the portfolio in digital coins.
Step-by-step guide on how to invest in the Indian cryptocurrency market
Select a crypto currency: Choose a cryptocurrency you want to invest in. Like any other asset class, each cryptocurrency has its own fundamentals and relies on different blockchain networks, mining techniques, and intrinsic value. As cryptocurrencies are extremely volatile, it is crucial to do your research well and then decide how much money should be invested in that specific cryptocurrency.
Select a cryptocurrency exchange: To make a purchase of cryptocurrency, it is essential that you have a functioning account in a cryptocurrency exchange. A cryptocurrency exchange is an online trading platform that helps you buy or sell cryptocurrencies. To know about the best cryptocurrency exchanges in India, read our article “Compare Crypto Exchanges in India” for more information on exchanges.
Once you have selected a cryptocurrency exchange of your choice, you need to register by providing the personal information such as your name, address and complete KYC formalities. Then you receive a deposit address from the platform. Once you get that, you are ready to invest.
Choose your comfortable payment method: Once you have selected your cryptocurrency exchange of choice, be sure to also select the most viable online payment method, such as credit/debit cards or instant bank transfers, peer-to-peer options. to-peer (P2P), or even a crypto wallet. You need to add funds to your payment gateway in order to buy cryptocurrency.
Buy cryptocurrency: After adding the funds, you can now easily buy the cryptocurrency you selected. After registering the crypto platform with the added funds, you will need to select the chosen crypto coin from the different currencies, which will be displayed in relation to their current market price, total volume, exchange symbol and currency. other relevant market information. You need to click on the “buy” tab which will help you buy the cryptocurrency you have selected.
Store your crypto securely: Once you receive the crypto coins in the fiat currency exchange, remember to store your currencies in the most secure way. Remember that cryptocurrencies are not backed by any regulated entity and therefore it is very important to secure them securely as they are always at risk of theft or hacking.
While almost all exchanges offer online wallet options, some investors also prefer cold storage, which allows you to save your coins offline. Cold wallets are not connected via the internet and are therefore considered one of the safest options for holding cryptocurrencies.
“Sell” on time: This is a very crucial step, which finally helps you earn money by investing in any cryptocurrency. In the same way that you placed an order to “buy” a cryptocurrency, you can sell the cryptocurrency by clicking on the “sell” tab which will appear in your wallet. The investor also has the option of selling his investment wholly or partially based on his own call. It is very important to book your profits in a timely manner.
Whether it’s the crash of such a huge global stock exchange, FTX, or the fear of rising inflation and higher interest rates, everything has put a huge dent in people’s confidence. investors as they hesitate to make new investments in the market.
With the surrounding uncertainty and looming macroeconomic situations around the world, it is best to watch market movements with caution. It is definitely a good time to closely observe the details of the cryptocurrency market and not make impulsive and rash decisions.
And you never know, once this chaos completely subsides, crypto investors may be able to find their favorite digital assets at a fair value.