Terra (UST), a stablecoin designed to fix the value of the US dollar, and its sister coin, Luna, both fell. Luna, a not-so-stable stablecoin, was selling for around $118 just a month ago, but is now virtually worthless. Cryptocurrency has managed to erode the wealth of millions of investors, many of them from India.
The stock market and the crypto world have attracted a large number of new investors over the past two years, due to a liquidity-driven bull market in a low interest rate environment. Over 20 million Indians have invested in cryptocurrency in 2021 alone. However, recent crashes in both markets have affected how investors view them. The recent market meltdown has debunked several market mistakes, especially in the lesser-known realm of cryptocurrency and blockchain technologies.
While most investors start with the more popular Bitcoin and Etherium, they quickly move on to altcoins in search of bigger profits. The whole ecosystem has been affected by the Bitcoin collapse. In November 2021, Bitcoin hit a high of nearly $69,000. It has dropped to $33,000 in just over two months and is currently trading around $30,000.
A fall like this has investors about to jump out of their skins. Many insightful opinions have been expressed by a generation brought up in the age of the Internet. Some of the discussions we heard at Pushstart about cryptocurrency and blockchain include:
- Budget 2022: India’s budget for 2022 does not inspire confidence in cryptocurrencies. As the government first recognized cryptocurrency in the budget, it imposed a 30% income tax on all virtual digital assets (VDAs) and a 1% TDS on every transaction, losses being neither deferred nor compensated. This has led to an increase in the cost of trading cryptocurrency in the country.
- Regulation: Due to the significant volatility of the asset class, crypto communities around the world have called for a global regulatory framework to prevent incidents like the Luna crash. Because many investors believe that a decentralized technology like blockchain should have no regulatory authority, a self-regulatory movement has become necessary.
- Buy the dip: Although crypto has been in a bull market for the past two years, crypto groups seem to be moving away from the “buy at any price” and “buy the dip” trading mindsets. Markets have demonstrated their supremacy by reflecting the fact that prices are not constantly rising. Veterans say many new investors are learning age-old lessons.
- Intrinsic Value: Communities have debated the usability of certain cryptocurrencies as well as the underlying fundamental value of the asset class. Terra has been called a pyramid scheme by hedge fund billionaire Bill Ackman, who has argued for industry self-regulation. He says the failure of coins like Terra has reduced investor confidence in blockchain technology, which he considers great.
- Advertising: Blockchain-related companies have been marketing and advertising aggressively over the past two years. These advertisements were often misleading, stating that investing in cryptocurrency was a simple method of making money. This crypto meltdown has demonstrated to the world that this is not the case.
- Bubble: Every market goes through a cycle of fear and greed. Smart money enters when fear is high, while greed is often seen as the top of the market, followed by a bubble and finally a major drop. Historically, stock markets have seen bubbles burst, but many people wonder if this is the end of cryptocurrencies.
- Technical Analysis: Technical analysis, the study of charts, price movements and patterns, I believe, are necessary to make money in cryptocurrency. While many investors have gotten their hands dirty with cryptocurrency, they are trying to adapt by learning about technical analysis and looking for future possibilities.
- TO BUY ! “The time to buy is when there is blood in the streets,” as Nathan Rothschild once said, which is what many traders suggest doing. As cryptocurrencies have fallen to new lows, many people are considering making staggered investments in them.
Blockchain, the technology that underpins cryptocurrencies, is something I believe in. Whether or not there is a pause in the cryptocurrency price race, the fundamental technology is amazing and will undoubtedly be the technology of the future. Whether or not this is a temporary “go to the moon” currency halt, only time will tell.
(The author is the founder of Pushstart. Views are his own.)