Yet long-term investors are ignoring the extreme declines in the value of digital coins and the collapse of exchanges that make them available to investors.
It’s only June. Winter is coming.
So far, at least, leaders in the cryptosphere aren’t too worried. They say this is normal and that a crypto bear market is not the same as a stock bear market: the lows are more extreme, but so are the highs.
“Crypto bear markets typically fall between 85% and 90%,” said Jason Yanowitz, co-founder of Blockworks, a research platform for crypto investors, executives and builders. Over the past decade, two prolonged crypto downturns have seen bitcoin lose over 80% of its value, but the coin has rebounded — and more.
During the crypto bear market from 2017 to 2018, bitcoin fell 83% from $19,423 to $3,217. But in November 2021, the coin was valued at $68,000.
Over the same period, etherium fell from $1,448 to $85, a drop of around 95%. As of November 2021, the coin was valued at $4,850. The bear market between 2013 and 2015 also saw bitcoin fall around 82% from $1,127 to $200.
“If you bought [bitcoin] at the peak of the 2017 bull run (around $20,000), you saw an 80% decline from the following year. But if you continued to hold, you’d be up almost 60% right now, even after the crypto market’s most recent decline from all-time highs last November,” said Felix Honigwachs, CEO of Xchange Monster.
“I really don’t agree with people who say there’s no way to recover from something like this,” Yanowitz said. “I think people look at crypto and think it’s weird or it’s not real. If you don’t think crypto is real, you probably think it’s overvalued.” But this pullback is not as bad as the last crypto bear market, he added.
Yet digital currency raises serious concerns. Fewer investors were exposed to the sharp declines in crypto during the last downturn, so more are now at risk of losing money this time around. Some new crypto-adjacent companies may also falter during the downturn in this crowded crypto market, but the value of coins will likely rise again in the long term, BAND Financial co-founder and managing director John Browning said on Tuesday. .
As Warren Buffett famously said, “It’s only when the tide goes out that you learn who’s been swimming naked.”