Cryptocurrency’s entrance into the investment bubble was met with enthusiasm. But, what happened that led to the market not reciprocating the same.
Absence of reliability
Once heralded as a unique take on investment, Cryptocurrency has faced tumultuous times in recent times. Since its inception, the market has experienced various setbacks including the Russia-Ukraine dispute. However, the prime reason for the failure of crypto has been the FTX market crash.
FTX and Binance were one of the world’s largest cryptocurrency platforms. To reduce its competition, Binance decided to buy out FTX. However, in the later stages of the deal, Binance refused to purchase the platform. In its justification, Binance pointed out that FTX hosted multiple issues related to finance and regulatory elements.
Binance’s statement confounded investors and led to the emergence of doubt. This ultimately caused investors to pull out of Bitcoin, resulting in the loss of liquidity in the crypto market. In such a scenario, Crypto experts believe that individuals still looking to invest in cryptocurrency should invest in the more “reliable” choices such as Bitcoin or Ethereum.
While the FTX market crash is crucial to understand the fall of cryptocurrency there are several other issues that the market dealt with long before its inevitable exposé. The most crucial of them all being the absence of regulation. Cryptocurrency has absolutely no guidelines for investors to follow. If an investor does experience a slip-up or dispute during their investments, they cannot be redeemed.
One of the examples of this can be the market crash of the cryptocurrency Terra (Luna). Terra (Luna) was ranked among the top 10 most valuable cryptocurrencies and had a market cap hovering above 40 billion USD. Within 24 hours, the market crashed losing its valuation from 40 billion to a stunning 500 million USD.
This was yet another blow experienced by the investors of cryptocurrency. Individuals who had dumped their life savings into the coin, lost their livelihoods. The most unsurprising parts was that none of these discrepancies could be challenged in the market. Since, there was no rulebook to refer to.
Besides regulation, the market was also exposed to online exploiters. Since the market was digital and free of any guidelines, it became an easy bait for hackers to grab any investors money. The decentralized nature of the blockchain technology, while providing transparency and immutability, also exposed vulnerabilities.
The continuation of such thefts and the lack of security in the crypto market meant that the market was no longer a safe haven for the investors to rely on. The benefit of anonymity that the crypto market provided later became its enemy. Due to cryptocurrency being anonymous, investors involved in the market struggled to trace their own investments due to the involvement of blockchain analytics companies.
The unsure path ahead
The fall in cryptocurrency is no surprise. Considering the aforementioned factors, among many others, companies fail to rely on the crypto market. Since the invention of Bitcoin, in 2008, the crypto market has fallen from a valuation of 3 trillion USD to a little less than 1 trillion USD in today’s time. With the market continuing to exist off of erratic billionaire investments, only time will dictate the future that the crypto market holds.