Last year, the word “crypto” was trending on the internet as the crypto market was generally booming.
However, it now appears that the good fortune of digital coins has diminished as cryptos have slipped into a serious bear market. Bloomberg recently reported that while short-term investors wasted no time in disposing of their holdings, even old-timers are now leaving the scene.
The latest Bitcoin (BTC) crash saw the asset’s price drop to $17,000, its lowest price since late 2020. At least, according to data from Google Trends.
But, while downturns can generally be a part of crypto markets, things continue to look bleak for crypto.
What Triggered Bitcoin’s Latest Crash?
Bitcoin slid nearly 70% from its November all-time high, but it all started in March when CNBC reported that the Federal Reserve approved its first rate hike in three years. This singular act was then a major turning point, putting downward pressure on risky assets like Bitcoin. Meanwhile, a series of other events quickly followed that also impacted Bitcoin’s crash, including Russia’s invasion of Ukraine and the crash of Terra.
Rob Schmitt, COO of infrastructure provider Toucan, told Cointelegraph:
“A combination of macro headwinds, such as rising interest rates and geopolitical uncertainty, triggered a broader market downturn that prompted a major delegation event in crypto markets. Specifically , the implosion of Terra and the ensuing insolvency/deleveraging of Celsius and Three Arrows Capital forced the liquidation of large amounts of BTC, causing prices to plummet.
Vincent Chok, CEO of First Digital Global Digital Payments, insisted that the collapse of Luna Classic (LUC) was the main cause of the accident. He told Cointelegraph:
“It’s part of the normal market cycle. The main trigger was not the geopolitical conflict, but the collapse of LUNC and the systemic risks associated with the large exposure to this token.
The collapse triggered margin calls for hedge funds and defined liquidity positions. Chok added that this is part of the industry’s super cycle, an avoidance of the bull run. Something had to be fixed sooner or later, he added.
Crypto will survive
Bitcoin has been removed as dead at least 458 times in the past. But each of those times, he managed to come back to life.
Kevin Owocki, founder of Gitcoin DAO – an open source Web3 project funding platform – told Cointelegraph:
“Bitcoin has been declared dead hundreds of times in the past, and so far these comments have always been wrong. If the past is any guide, Bitcoin is not dead. price, but I’ve always been focused on the future of what Web3 can build and how these tools can provide solutions to global issues facing humanity.
“We’ve been through ‘winter’ times before where the value of digital assets has fallen to uncomfortable levels, but we’ve seen the larger crypto community emerge from these times stronger and more resilient than before. I think we will get out of it and that, on the other hand, the products and assets that survived will be value generators not just for Web3, but beyond,” Owocki added.
Furthermore, Schmitt also claimed that “a temporary drop in its price does not have a significant impact on Bitcoin.” He explained how Bitcoin had to suffer several bigger declines in the past.
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Several other on-chain metrics suggest that Bitcoin will most likely exit from its current predicament. One such important metric is the 200-week moving average (WMA).
For a long time, the moving average has been a credible indicator of the price of BTC. Previously, every time Bitcoin hit 200 WMA, it completely rebounded. A careful look at what happened between 2015 and 2020 in the chart below provides some insight into this claim.
There are times when Bitcoin dipped slightly below the 200-WMA, but it never stayed there for too long.
So, given that Bitcoin is currently trading at a range very close to its 200-WMA, there may be reason to believe that Bitcoin is not dead. In fact, we are rightly expecting a reversal to the upside soon.
The impact of crypto on the economy
Institutional involvement in the latest crypto market bull cycle has raised concerns that the wider economy could potentially be affected.
Many companies have had to lay off large numbers of their employees, and others are considering potential insolvency. Additionally, a recent Pew Research Center investigation found that about 16% of American adults have somehow been involved in cryptocurrency. So, to some extent, there is some domestic exposure to the current crypto market situation.
However, not everyone thinks the situation in the crypto market will impact the wider economy. In an interview with CNBCJoshua Gans, an economist at the University of Toronto, said:
“People don’t really use crypto as collateral for real-world debt. Without it, it’s just a lot of paper losses. So that’s low on the list of problems for the economy.
Despite the gloomy outlook for the crypto market at the moment, crypto keep on going to see mass adoption at all levels. With increased involvement from sports organizations, individuals, businesses, and even state and federal governments, there is a clear trend in crypto adoption.
According to a US-based media Axios, crypto app downloads are improving year on year, which should be attributed to more media coverage. While there was a 64% growth in 2020, the last year saw an even more impressive 400% spike in the number of crypto apps downloaded.
Crypto offers with sports brands, teams and leagues grew over 100% in 2021 and is expected to reach $5 billion over the next four years.
How long before BTC bounces back?
Based on past trends in the crypto market, the current situation may take weeks, months, or even years to reverse, and while Bitcoin price is suffering right now, that shouldn’t take away the fact. that it is still up 31,437% over the past nine years. In fact, it was currently more than double its price two years ago. owocki said:
“At Gitcoin Holdings, we know that the general market recovery may take some time, but we don’t know exactly how long or which assets will recover. It could be five weeks, it could be five years. We are focused on the creation of long-term value.
While there is no specific timeline as to when Bitcoin will resume an uptrend, it certainly appears that a temporary price dip ultimately won’t impact the rapid growth in usage, long-term crypto asset adoption and prices.
Owocki thinks the evolution of the Internet can be seen through the prism of the evolution of nature. Instead of natural selection, “we have market selection”. He said there has been a “Cambrian explosion” of opportunity created by the launch of Bitcoin and multiple BTC forks.
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Then came Ethereum, and a rich ecosystem of layer 2s, decentralized finance, non-fungible tokens, crowdfunding tools, decentralized autonomous organizations, and alternative layer 1 networks.
“As this Cambrian explosion weaves its way through cycles of greed and fear, projects grow and die, and through it the whole heartbeat of innovation continues to beat. I look forward to ‘accelerate this evolution until we get to the Web3 equivalent of keystone species like dolphins, humans, forests or mycelial webs,’ Owocki added.
Gitcoin founder DAO doesn’t think the BTC or crypto crash is big enough to kill an economy. Throughout history, Owocki added, there have always been bear markets and bull markets. He says Web3 will emerge from the other side stronger and bring even greater value to the global economy than ever before.