Can the Cryptocurrency Market Survive the Current Crash?
Over the last couple of days, the cryptocurrency market has experienced sharp drops in almost every cryptocurrency. The top ten leading cryptocurrencies, including Bitcoin, Ripple and Ethereum, have had their prices drop by double digit percentages, resulting in a total market share loss of $100 billion on Tuesday alone. Several factors are driving the crash being witnessed in the cryptocurrency market.
According to Tom Meredith, CEO of Bitminutes, fear and uncertainty following warnings on scams and hacks in the cryptocurrency market are among the underlying factors driving the crash.
"But there is also govt regulation and overhyped junk stocks that went up too much. Actual big technology changes launching at the core of Bitcoin, huge futures manipulation that finally hit plus fraud.The Bitconnect ponzi scam is a huge black eye on the market, it shows the need for better quality controls," he adds.
Agreeing that fear is at the core of the crash currently being witnessed in the crypto market, Convergence 4D and Silica Nexus CEO, Andrew Prell, notes that greed has fueled volatility of cryptocurrency prices.
Prell says, "Volatility, like all markets, is driven by greed and fear. The factors for this rapid decline seem to be fueled mostly by the later, with much of the new money in the market coming from less sophisticated consumers vs institutional investors adding momentum to the correction. While we don’t have much year over year market data, late January has seen declines even when the market was driven by more seasoned traders."
But, will the cryptocurrency market overcome the current crash and bounce back? Industry players think due to the nature of this new asset class, it certainly will.
The founder of Menlo, Matthew Nolan says, "The thing that makes crypto different from other asset classes is that it's fundamentally ideologically driven. The community will for the most part HODL and the market is sure to bounce back stronger than before. I'm personally buying a bunch of post-ICO tokens right now. This market dip is the best time to diversity your crypto portfolio."
However, it’s difficult to tell how long the recovery process will take, it could take a long time or happen sooner than expected.
"Predicting how soon we will see a recovery is difficult, but once we reach a new floor it will likely take a few months and additional capital entering market to set new high water marks. Our narrative is likely to remain the same as we are still in our private sale and the multiples we will build with our platform are historically still in our future and very high," Prell adds.
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.