Terra (UST), a stablecoin designed to peg the value of the US dollar, and its sister coin, Luna, both plummeted. Luna, a not-so-stable stablecoin, was selling at around $118 just a month ago, but it is now virtually worthless. The crypto currency managed to erode the wealth of millions of investors, many of whom were from India.
The stock market and the crypto world have attracted a large number of new investors over the last two years, owing to a liquidity-driven bull market in a low-interest rate environment. Over 20 million Indians invested in cryptocurrency in 2021 alone. However, both markets’ recent crashes have affected how investors see them. The recent market crisis has debunked several market fallacies, particularly in the lesser-known area 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 was affected by the Bitcoin collapse. In November 2021, Bitcoin reached a peak of almost $69,000. It plummeted to $33,000 in just over two months, and currently trades at roughly $30,000.
A fall like this has investors on the verge of jumping out of their skin. Many insightful opinions were expressed by a generation raised in the internet age. Some of the discussions we’ve heard at Pushstart on cryptocurrency and blockchain include:
- Budget 2022: India’s budget for 2022 does not inspire confidence in cryptocurrencies. While the government acknowledged cryptocurrency for the first time in the budget, it imposed a 30% income tax on all Virtual Digital Assets (VDAs) and a 1% TDS on each transaction, with losses not being carried forward or set off. This has led to an increase in the cost of trading cryptocurrency in the country .
- Regulation: Because of the asset class’s significant volatility, crypto communities all around the world have been calling for a global regulatory framework to prevent incidents like the Luna crash. Because many investors feel that a decentralised technology like blockchain should not have a regulatory authority, a movement for self-regulation has become necessary.
- Buy the dip: Although crypto has had a bull market for the past two years, crypto groups appear to be drifting away from the ‘buy-at-any-price’ and ‘buy the dip’ trading mindsets. The markets have demonstrated their supremacy by reflecting the fact that prices do not constantly rise. Veterans say, a lot of new investors are learning age old lessons.
- Intrinsic value: Communities have been debating the usability of certain cryptocurrencies as well as the asset class’s underlying fundamental value. Terra has been dubbed a pyramid scam by hedge fund billionaire Bill Ackman, who has advocated for self-regulation in the sector. He claims that the failure of coins like Terra has reduced investor confidence in the blockchain technology, which he considers to be a great.
- Advertisement: Companies connected with blockchain have been aggressively marketing and advertising in the last two years. These commercials were frequently deceptive, stating that investing in cryptocurrency was a simple method for people to make money. This crypto collapse has demonstrated to the world that this is not the case.
- Bubble: Every market goes through a fear and greed cycle. The smart money enters when the fear is high, while greed is frequently considered the top of the market, followed by a bubble, and finally a major fall. Historically, stock markets have seen bubbles deflate, but many people are wondering if this is the end of cryptocurrencies.
- Technical Analysis:Technical analysis, the study of charts, price movements, and patterns, I believe, are required to earn money in cryptocurrency. While many investors have burnt their hands with cryptocurrency, they are attempting to adapt by learning about technical analysis and seeking for future possibilities.
- BUY!: “The time to buy is when there’s blood in the streets,” as Nathan Rothschild famously stated, is what a lot of traders suggest doing. As cryptocurrencies have plummeted to new lows, many individuals 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 price run of cryptocurrency, the fundamental technology is incredible and will undoubtedly be the technology of the future. Whether or not this is a temporary halt in “going to the moon” currencies, only time will tell.
(The author is Founder of Pushstart. Views are his own.)