Is there a way for the cryptocurrency industry to avoid the half-baked bear market of Bitcoin?

Is there a way for the cryptocurrency industry to avoid the half-baked bear market of Bitcoin? – Mail Bonus

There is every reason to be afraid. In previous markets, reductions have been over 80%. While diamond may hold wisdom among many Bitcoin (BTC) masters, altcoins speculators know that diamond delivery can mean almost (or complete) destruction.

Regardless of one’s investment philosophy, in a risky environment, the participation space escapes with haste. The cleanest among us could see silver fodder as the devastation clears the forest floor of weeds and leaves room for the strongest projects to flourish. Undoubtedly, there are many young lost people who would grow up to great heights if they had the opportunity.

Investment and interest in digital property are water and sunlight for the fertile soil of ideas and entrepreneurship. Smaller reductions serve the market better; better park than desert.

A short story about the cryptocurrency market

To solve a problem, we must first understand its motivations. Bitcoin and wider digital real estate have survived a number of bear markets since the beginning. In some ways, we are in fifth place, depending on the definition of each individual.

Five Bitcoin bear markets. Source: TradingView

The first half of 2012 was full of uncertainty in supervision, which culminated in the closure of TradeHill, the second largest Bitcoin exchange. This was followed by burglary of both Bitcoinica and Linode, which resulted in the loss of tens of thousands of Bitcoin and a 40% decline in the market. fear regulators. and defaults from the Bitcoin Savings and Trust Ponzi Scheme crashed the price once again, falling by 37% .¹

Interest in the new digital currency did not hold back for long, as BTC rose again to find a balance of around $ 120 so far next year before rising to over $ 1,100 in the last quarter of 2013. And, just as spectacularly, Silk Road holding on of the DEA, the Central Bank of China ban and the scandal surrounding Mt. The Gox closure plunged the market into a brutally prolonged 415-day recall. This phase lasted until the beginning of 2015 and the price dropped to only 17% from previous levels in the market.¹

From there, growth was steady until mid-2017, when enthusiasm and market madness let Bitcoin prices into stratos and peaked in December at almost $ 20,000. Intense profits, further hacks and rumors about countries banning the property, crashed the market again and BTC declined for more than a year. The year 2019 brought a substantial increase to almost $ 14,000 and was mostly over $ 10,000 until pandemic BTC fell below $ 4,000 in March 2020. It was a staggering 1,089 days – almost three full years – before the cryptocurrency market reached its 2017 peak again.

But then, as many in the space have memed, the money printer went “brrrrrr”. Global monetary expansion policies and fears of misperformance inflation fueled an unprecedented rise in asset prices.

Bitcoin and the larger cryptocurrency market reached new heights, reaching almost $ 69,000 in BTC and over $ 3 trillion in the total market value of the asset class in late 2021.²

The total market value of cryptocurrency decreases. Source: TradingView

As of June 20, the liquidity situation of the pandemic has dried up. Central banks are raising interest rates in response to alarming inflation figures, and the larger cryptocurrency market has a total investment of a relatively small $ 845 billion. Undoubtedly, this is primarily due to the incorporation and speculation surrounding start-up high-risk companies that are around 50% to 60% of the total market value of digital markets.²

However, altcoins are not entirely to blame. The collapse in 2018 caused the price of Bitcoin to fall by 65%.

How to reduce market risk?

So it is, of course, the risk that drives this unnecessary downward swing. And we’re in a dangerous environment. Thus, our young and fragile garden first withers among the entrenched asset classes of the traditional.

Curators are very aware of this and need to balance the encryption investment and a larger slice of secure assets. Retail investors and professionals often drop their bags at the first sign of a bear, return to the traditional market or in cash. This response policy is seen as a necessary evil, often at the expense of imposing a short-term capital gains tax and at risk of missing out on significant unpredictable reversals, which are preferred over devastating and prolonged cryptocurrencies.

Must it be so?

How can an asset class that is so driven by speculation promise to reduce risk sufficiently to keep interest rates and investments afloat in the worst of times? Bitcoin-heavy cryptocurrencies do better, consisting of a higher percentage of the least volatile of major assets. However, with the 0.90+ correlation of Bitcoin with the altcoin market, the result of the dominant currency of the cryptocurrency often serves as a stream for smaller assets that have been caught in the same storm.

CTC’s compliance with Ether and all altcoins. Source: Arcane Research

Many people flee to stablecoins in scary times, but as evidenced by recent Terra disasters, they are basically more risky than those with them. And paired tokens are loaded with the same worries inherent in every other digital asset: trust – whether in the market or its organization – uncertainty in regulations and technical weaknesses.

No, simply identifying assets in a safe haven will not provide a steady yang to volatile yin in the cryptocurrency market. At the height of fears, an inverse price relationship must be achieved, not just neutrality, in order to keep investment in cryptography and at a return that justifies the absorption of this inherent risk.

For those who are willing and able, the incorporation of the reverse Bitcoin exchanges (ETFs) offered by BetaPro and Proshares provides protection. Like participating in shortages, however, barriers to entry and commissions make these solutions even less likely to sustain average investors through the bear market.

Furthermore, centralized exchanges, which are increasingly regular and meet requirements, make indebted accounts and cryptocurrencies inaccessible to many in larger retail markets.⁵

Distributed exchanges (DEX) suffer from the limitations of anonymity, and solutions offered for such acronym systems have largely required central exchange to work collaboratively. In fact, both solutions do not directly support the cryptocurrency market.

Are Encryption Security Assets Enough?

The solution to the mass exodus of investments in the cryptocurrency market must be found in the assets themselves, not in their derivatives. It may be impossible in the medium term to escape the inherent risks mentioned above. But an explanation of the rules is promised and discussed all over the world. Centralization and technical risk are finding new countermeasures with decentralized independent methods and the participation of increasingly intelligent investors’ cryptocurrency skills.

Through many trials and tribulations, cryptocurrency entrepreneurs will continue to bring real-world solutions to the forefront. The use of blockchain technology that finds significant acceptance in “defensive” industries in a minimum such as healthcare, utilities and the purchase or production of consumer goods would offer an alternative to aviation. Such a development should be encouraged in these times of uncertainty. Such times of uncertainty should rather encourage this development according to the wisdom of the market.

However, ingenuity should not be limited to representing the weak solutions of traditional markets. This is a new world with new rules and possibilities. After all, systematic incentives are inversely feasible.

Inverse Synths from Synthetix seeks to do just that, but the protocol sets both floor and ceiling prices, and in such cases the walkway is frozen and can only be replaced on their platform.³ An interesting tool for sure but unlikely to be used by the larger cryptocurrency market . Actual solutions will be widely available both geographically and conceptually. Instead of providing only a dry place to wait for the storm in the down market, cryptocurrency solutions must yield returns to justify the risks still inherent in our evolving asset class.

Is there silver feed in the bear market? Will the survivors of cryptocurrency winter appear in a market that is more rewarding for application and adoption than speculation? Healthy haircuts might be what our young garden needs; prolonged droughts are certainly unnecessary. Markets are simply problems and, with the clever application of blockchain technology, hopefully solvable.

Disclaimer. Cointelegraph does not endorse any product content on this site. While we aim to provide you with all the important information we could gather, readers should do their own research before taking action related to the company and take full responsibility for their decisions, nor can this article be considered as investment advice. .

Trevor is a technical advisor, entrepreneur and principal at Positron Market Instruments LLC. He has consulted with corporate planning teams in the United States, Canada and Europe and believes that blockchain technology promises a more efficient, equitable and equitable future.