There has not been such a sharp drop since May 2021
This has never happened before, and here it is again: the cryptocurrency market has collapsed. On the night of December 4, all major coins lost their value simultaneously – such a sharp drop has not occurred since May 2021. For example, Bitcoin, which was trading around $57,000 the day before, suddenly fell to $42,000. This article, which was prepared in conjunction with the cryptocurrency exchange Currency.com, explains why the fall is a good thing and how you can benefit from it. even if you are new to cryptocurrencies.
Why have cryptocurrencies fallen so much?
Another strain of coronavirus, omicron, is to blame. Traders feared potential new restrictions could disrupt supply chains and hit the economy again. Not only cryptocurrencies went into the red. Stock and commodity markets around the world, currency markets of developing countries also found themselves in the red zone. American indices fell by an average of 2.5%, European indices – from 2.5% to 4%. The Russian ruble also fell against the dollar by a little more than 1%.
Usually there is no such correlation between stock quotes and cryptocurrency prices, but not this time. All due to the fact that this fall there were also other information drives to which cryptocurrencies are much more sensitive. Here are just some of them:
Ban on any cryptocurrency transactions by the Chinese Central Bank in September;
Strengthening of regulation on the market by the USA;
Preparation for the ban on cryptocurrencies in Russia.
Given all this news, it is impossible to predict with certainty when the next collapse of cryptocurrencies will occur. However, it is not superfluous to think about how to prepare for it and which currencies/coins to invest in at a low price when the collapse eventually happens.
1. Bitcoin and Ethereum
You will never be able to buy bitcoin and ethereum cheaply – you have to come to terms with that. But buying shares of these coins while they are cheaper than usual is quite tempting.
In October, many investors raised their BTC forecasts again. There are several reasons, but the main one is the launch of an investment fund based on a coin in the USA. Washington is finally coming together to endow the industry with a comprehensive regulatory strategy. If regulators choose the most stringent approach to most cryptocurrencies, the market may split into assets recognized by the US authorities and those that do not have this status. But a number of coins will fall into the first category. And Bitcoin is the number one contender here, as well as Ethereum, on the basis of whose network most of the currently popular NFTs are built.
2. Cardano
Cardano coin (ADA) is the sixth largest cryptocurrency as of November 2021, and after its official appearance in the decentralized finance (DeFi) sector, it can climb several positions higher. The news about the emergence of so-called smart contracts – contracts that do not need intermediaries, because both parties sign them themselves in the blockchain network – can fuel the interest of buyers.
3. Binance Coin
Binance Coin (like Cardano) interests investors primarily in the context of DeFi as a competitor to Ethereum. While the creators of Ethereum procrastinate on network updates and speeding up transactions, Binance Coin has a great chance to overtake the competition at the turn. In a word, investments in this cryptocurrency may well become promising in the long run.
4. XRP
Cryptocurrency XRP may receive a positive revaluation and turn out to be a promising cryptocurrency investment. In addition, the threshold for buying this coin is quite low – 1 XRP costs less than one dollar. Ripple, the company behind XRP, is actively developing technical solutions for cross-border payments. Soon, their products may start to be used by several central banks of Asian countries and Great Britain.
There is also a downside that needs to be taken into account – Ripple’s development company continues its litigation with the US Securities and Exchange Commission (SEC). They may be able to prove that their coin is not a security. However, it is also worth considering the risk of XRP being banned in the US.
5. Polkadot
The main idea of the Polkadot project is to increase the compatibility of different blockchains within the same platform. The project was even called the “killer of Ethereum”. The company is developing rapidly. In 2020, she launched a “testing ground” for codes – Kusama.
And although the Polkadot cryptocurrency is only an application to the main purpose of the network, it is quite actively used both in the ecosystem itself and outside it. Currently, the coin is already in 9th place among the top 100 cryptocurrencies.
6. Avalanche
The Avalanche token (AVAX) is a cryptocurrency of the network of the same name. Its goal is to speed up token transactions and make smart contracts and DApps (decentralized applications) easier and faster to use.
In mid-November, Avalanche announced a partnership with one of the giants of the audit market, Deloitte. This was reflected in the sharp growth of AVAX – on November 16, the token was at $94.03 and in just a couple of days it rose to a maximum of $110.31. At the time of writing, Avalanche was the 10th largest cryptocurrency in the world. Analysts are unanimous in the fact that for 2022 this coin has the most promising prospects – by the end of the year, according to various estimates, it will cost between 230 and 280 dollars.
7. Chainlink
Chainlink, a relatively young but already visible and bright crypto market player, has a similar goal to Polkadot – to make a service intermediary between blockchains and smart contracts. Chainlink’s partners include the SWIFT global payment system, from which the US has been threatening to disconnect Russia for 7 years in the most radical version of sanctions. In addition, investors from the famous Grayscale fund bought Chainlink into their portfolio. Another Chainlink user recently became the international news agency Associated Press.
However, the coin is rightly criticized for too weak a recovery from the market decline, and also for the fact that most of its turnover is held by large investors – they now own about 7% of the total volume of Chainlink.