Crypto Crash: Why Is Crypto Crashing?
Are you finding yourself concerned about the ongoing crypto crash? Are questions about the stability of cryptocurrencies and the potential downfall of Bitcoin causing unease? These worries are completely understandable, especially if you're relatively new to the world of crypto.
It's important to recognize that Bitcoin holds a significant sway over the entire crypto market; when it moves, it often triggers corresponding movements in the broader market. Reflecting on the history of crypto crashes, you might be surprised by the frequency with which Bitcoin has undergone substantial downturns.
Cast your memory back, and you'll recall instances when Bitcoin faced severe collapses. Take, for instance, the remarkable volatility of Bitcoin in the past. Did you know that during a mere three-day span from May 10 to May 12 in 2013, Bitcoin's value plummeted by a staggering 87 percent? What's fascinating is that despite this tumultuous drop, Bitcoin managed to soar roughly 100 times, equivalent to a remarkable 10,000 percent increase, within that same year. It surged from around $10 at the beginning of 2013 to approximately $1000 by the end of December 2013.
Considering the most recent crypto crash, it's helpful to contextualize it within the broader history of crypto's major collapses and the pivotal events that contributed to them.
Disclaimer: We want to emphasize that this is not financial advice. Cryptocurrencies operate in a volatile market, where values can drastically fluctuate in a blink of an eye. It is imperative to conduct thorough research and seek guidance from a qualified financial advisor before investing.
Bitcoin’s 7 Biggest Crashes
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June to December 2011, -93%
The first significant fall of Bitcoin occurred in 2011, as Bitcoin fell from $29 to $2. Since then there has not been such a severe fall (93%).
The main cause was the hacking of Mt. Gox, the leading centralized crypto exchange in the early times of cryptocurrency. A hacker got access to the user accounts of Mt. Gox and could fakely collapse Bitcoin to $0.01.
While the crisis was not genuine, Bitcoin and the wider ecosystem were dealt a big blow in their first days. But unfortunately, as you will soon discover, this was not the last Mt. Gox catastrophe.
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August 2012, -56.7%
The second significant fall of Bitcoin occurred one year later in the summer of 2012, when Bitcoin Savings & Trust, a Ponzi scheme that had promised huge weekly payments for investors, ceased paying out. Trendon Shavers, the operator of Bitcoin Savings & Trust, eventually went to jail for his actions.
Crypto-based Ponzi (paying old investor schemes with fresh investment capital) schemes are popping up over and over, even if Bitcoin is not having an investment return like dividend-paid shares.
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May 2013, -87%
This major crash in May 2013 was caused by both Bitcoin's growing too quickly and by yet another example of Mt.Gox mismanagement. BTC finally began cooling after a large 4-month rise with the price falling substantially. Bitcoin's price fell 52 percent on May 10, 2013, from close to $260 to $50 in under 6 hours,
This scenario was only worse, however, since the rise in the volume of trade was not managed by Mt. Gox, which resulted in an additional decline in price. And it did not stop there! Hackers made the decision to DDoS or take down the Mt. Gox website.
Given that Mt. Gox handled more than 70% of Bitcoin transactions at its maximum (far more than any other centralized exchange today), this created significant anxiety and selling pressure in the marketplace.
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December 2013 to March 2015, -84.6%
In December 2013, Bitcoin broke its former all-time high of $260, making the price parabolic. In a month or so, the price of Bitcoin rose about 5x or 500 percent, culminating in the first half of December at roughly $1,150.
Bitcoin began correcting the price following this huge surge. Again, because of Mt. Gox's difficulties, it was just made worse – once again. Mt. Gox stopped all withdrawals on March 10, 2014, before filing for bankruptcy on March 28, 2014, saying they lost 850,000 Bitcoin valued at about $450 million in total.
The Mt. Gox breach was one of the most devastating crypto events in history, perhaps delaying the growth of the industry by a few years.
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December 2017 to December 2018, -83.8%
In 2017, Bitcoin held a major rise from $1,000 in early 2017 to $20,000 in December. However, the price of Bitcoin rapidly started to drop and did so for a whole year until it began stabilizing.
Although the Mt Gox incident was not to blame, it may have played a part in the fall of the market, the market was probably waiting for too long to rectify the hyperactivity of the market by the end of 2017.
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March 2020: -50%
Bitcoin was not spared by the draconian lockdowns, and when the markets plummeted in March 2020, the Bitcoin market crashed even more. In just two days, Bitcoin's value plummeted by half. Over a month, it dropped from above ten thousand dollars in March to under four thousand dollars in March.
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May 2021: -53%
Bitcoin was the buzz of the investment world in May 2021 when it raced beyond an incredible $64,000 for a single coin. Then, in a single week, $1 trillion in value was wiped out of the worldwide crypto market. First, Elon Musk broke his pledge to accept Bitcoin as payment for Tesla vehicles. Then, another crypto persecution was announced in China. Finally, the general public was made aware of the impact of Bitcoin mining and crypto investors, who were at the whim of forces beyond their influence.
What Now?
The history of crypto crashes reveals a recurring pattern of Bitcoin experiencing frequent downturns; such dramatic collapses are not uncommon. It's a reasonable assertion to suggest that as this financial asset continues to mature, we should anticipate the occurrence of more crashes in the future.
Drawing a parallel, even the US stock market, now a seasoned and prosperous market globally, underwent substantial turbulence during its early stages. This includes the notorious 89% drop in equities that played a role in triggering the Great Depression, an era marked by a staggering one in four Americans facing unemployment.
Yet, remarkably, the US stock market endured through all the fluctuations and challenges, standing strong. In a similar vein, Bitcoin has persevered for over a decade, defying the "dead" label it has been assigned countless times.
In essence, despite persistent allegations of being a fraudulent concept, Bitcoin has exhibited resilience and appears to be riding a sustained trajectory. In fact, it stands as the most triumphant asset of the past decade, with no serious contenders even coming close to its level of achievement.
5 Ways to Prepare
Each investor lives with the possibility of a catastrophic economic collapse. It has happened in the past. It might occur again. If so, it may eliminate years of hard-earned savings and pension money in hours.
Fortunately, you may take precautions to prevent a market catastrophe or even a world economic crisis from protecting most of your assets. The main parts of a strong defense plan are preparation and diversification.
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Diversify
The most essential thing you can take to protect your money from a severe bear market is probably to spread your portfolio.
If you anticipate a problem approaching, you must at least be prepared to shift a substantial percentage of the money elsewhere.
Individuals nowadays may invest their money in a variety of different assets, each with a level of own risk, including stocks, liabilities, cash, property, derivatives, life insurance for cash, pensions, and precious metals. You can also experiment in other holdings such as oil and gas production companies.
The greatest approach to ensure that you have anything left if the bottom actually falls out is to diversify your money over many crucial sectors.
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Have some cash to buy the dips
There are several reasons why rich people tend to get richer over time. One of these characteristics is that they are liquid. As a result, once the markets correct, they are able to add to their holdings. You may do the same and build a very solid future portfolio.
Anyone who has purchased Bitcoin dips since 2013 is now rich. That is because every slump is followed by an upcoming bull surge. Looking from this viewpoint at the current market dynamics, you would immediately see that the present market drop is no cause for concern. Rather, it offers you an opportunity to expand your portfolio right now.
In order to reduce the dubious ideas owing to the high sales pressure, consider them as discount prices at your preferred shop. The opportunity becomes more visible all of a sudden.
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Check out cryptos that allow staking and yield farming
It is useless to attempt to bet on short-term pricing in a period in which the whole market is plunging. Focusing on other market elements that help you to gain from your portfolio is more sensible. Staking is one example, and DeFi yield farming is another.
When you stake cryptocurrency, you have the opportunity to generate a passive income independent of market movement. While the staking bonuses aren't meaningful when the token price falls, you still accumulate more. As a result, when the market recovers, you will have more tokens than before, each worth far more than when you began staking. The only way to make money is through speculative value assessment. It is far more rational than holding crypt.
DeFi yield farming may be described as the same. DeFi cryptos may have fallen in value, but there is still the chance to gain from them through loans. Investing in such cryptos means that, despite the downturn, you may grow your holdings. This means that once the rebounds of the market take place, you'll be far better than before the crisis. It is basic mathematics that can enable you to build your fortune whatever the market situation.
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Remember to focus on valuable cryptos
In the early recovery phase, investors tend to gain higher-quality assets following a market disaster. This means that they are likely to recover more quickly than their speculative rivals.
It makes sense, with this strategy, to look for high-value cryptos as soon as the label starts to ease. You're undoubtedly wondering how to identify a valuable cryptocurrency from a highly speculative one. Well, maybe this isn't apparent, but there are pretty fundamental aspects. Adoption is one of these.
The more widely used a cryptocurrency is, the more likely it is to be valuable. Bitcoin and Ethereum, for example, are now commonly utilized for payments and other purposes including the production of dapps. These two cryptos have also seen growing acceptance by institutional participants via Bitcoin ETFs and other traditional financial tools. These are characteristics that might make certain cryptos recover more quickly than others when positive feelings return to the market.
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Be deaf to the market noise
One pattern you may see with all rich investors is that market collapses never appear to disturb them. When the financial system looked awful, people like Warren Buffet were very calm. During the 2008 crisis, for instance, these people bought more and were substantially wealthier a few years later than they were before the crisis.
This is because smart investors know market declines are transitory. It works like this. At the moment, there is a lot of noise around crypto, ranging from the environment to the Chinese government crackdowns on cryptocurrency. All of this uproar may make you forget that the same worries existed when the markets fell in 2018.
At the time, the Chinese authorities cracked down on cryptocurrency exchanges, deepening the fall. The market, however, nevertheless boomed and significantly exceeded its 2017 highs. The dynamics are rather similar. If you trust your portfolio and disregard the noise of the market, it's likely that things will improve over time.
Conclusion
