Cryptocurrency has been a hot topic for the last few years and it doesn’t seem to be going away anytime soon.
There are many people who believe that cryptocurrency will crash, but there are also just as many who think they will continue on their upward trajectory.
So what is the truth?
Will cryptocurrency crash or will it continue skyrocketing in value?
This post examines some of the reasons why cryptocurrencies will not crash and also why they may crash any time soon.
What is Cryptocurrency?
Cryptocurrency is a digital currency that is not backed by a physical commodity such as gold or government-issued fiat money.
The key part of cryptocurrency is the blockchain, which uses cryptography to solve security and transparency issues with data storage, management, and transactions.
These ledgers are decentralized – meaning there’s no “leader” in control of them.
Bitcoin is the most well-known cryptocurrency.
It was created by Satoshi Nakamoto back in 2009 when he published his original white paper on it.
It has been around for over a decade and it remains to be stable as ever.
The decentralized nature of cryptocurrencies means that they are not subject to any one country’s regulations or banks which makes them more resistant to crashes than fiat currencies.
Bitcoins have intrinsic value because people will always need them in order to use their blockchain technology.
So this ensures coins keep being mined even when there may be a crash at some point in time.
Most experts agree that cryptocurrencies will continue going up.
While some anti-cryptos and government agencies have warned against crypto. That is a very risky investment and is subjected to crashing anytime soon.
As with any investment, cryptocurrencies carry risk because they are subject to the volatility of their value over time and could be lost if the account holder deletes them.
The cryptocurrency market has been subjected to large swings in valuation between 2016 and 2018 when it went from being worth US$800 billion to less than $200 billion before recovering back close enough to its original peak place at just under $400 billion.
Cryptocurrencies are used primarily outside of traditional financial institutions for various types of transactions; however, new products brought out by those same institutions provide wider access than ever before.
Interested parties can now purchase major currencies like Bitcoin through cryptocurrency exchanges.
The History of Cryptocurrency and Why it’s so Popular
One of the reasons why Crypto tends to be getting more and more popular is because of its history and dentralization.
Many people have been interested in this new technology, especially since the early days when Bitcoin was first introduced to the public.
After Bitcoin was created – other coins followed.
First it was Litecoin, then Ethereum.
To many people – this is the future of how we will “trade” our money and goods.
We no longer need to rely on banks or other institutions who can potentially manipulate what they are trading with us.
Cryptocurrency allows for individuals more control over their own finances than ever before by giving them a decentralized currency that cannot be manipulated in any way by anyone else but themselves.
After Ethereum, many other coins followed suit.
This is an important thing to note because it can be seen as a sign of what will happen in the future as cryptocurrency becomes more and more popularized.
It’s not just Bitcoin anymore.
There are many different currencies with their own unique features that people might want or need for whatever reason they may have.
Whether you’re looking at Litecoin because you think it will become more widely used than Ethereum, or Ripple if you believe it has potential to be one of the best cryptocurrencies out there right now; your decision on which coin to invest in matters less when we take into account how easy these decentralized trading platforms make investing in any currency possible (thanks, blockchain).
There are even tokens such as Filecoin that offer a new take on the cryptocurrency market with their own unique features.
The sheer number of cryptocurrencies and tokens in existence today (around 4000) is staggering, but not insurmountable – it’s important to know what you want out of your investment before deciding which coin will best suit your needs.
Cryptocurrency in the Future
The future of Cryptocurrency is unclear, but we know that it will continue to evolve.
The future of Cryptocurrency is a difficult question because the technology is in its infancy and there are many forces at play that can shape how cryptocurrencies will develop.
However, If you ask me I’d say that I see the crypto market changing the way we view money.
It’ll help people in countries like Venezuela where they’re not sure if their country will be around to see the next payday.
It’ll help people out of poverty and give them a chance at financial independency, but with that comes responsibility.
We all know it’s not going to be easy replacing fiat currencies or paper money, not now, not tomorrow.
But it will definitely happen.
And that’s a good thing for all of us.
Why Cryptocurrency may Crash (10 Reasons!)
If you ask me I’d say that there are a few reasons why I think – not just Bitcoin – but the entire Cryptocurrency market as a whole may crash at some point.
One of the few reasons why I think cryptocurrency may crash, it is due to the fact that there is no way to regulate it just the way fiat is being regulated.
The prices of the currency can change at any moment, which has made some people start trading coins in order to make more money off quick successions.
In addition, there are many scams out there and with a lot of these new currencies popping up – backed by scandalous individuals – without regulation or oversight, they will only continue increasing and might end up crashing the market.
Third, Cryptocurrency can be used in illegal transactions.
Illegal transactions such as drugs and weapons can be easily purchased with cryptocurrency, which makes it an easy target for law enforcement.
And since cryptocurrencies are mainly used to transfer money anonymously digitally – there is no way of tracking or tracing the transactions – making them a perfect candidate for illegal activities such as tax evasion and fraud.
Fourth, people are buying cryptocurrencies for the wrong reasons such as to get rich quickly and not because they believe in the currency.
The more people do this, the less demand will be for cryptocurrencies which will cause them to crash before our own very eyes.
Some of these crypto exchanges are vulnerable and can be hacked into because they lack security measures that help protect against cyberattacks.
Check out our guide on Crypto exchanges to see how choose the best one.
It’s possible that governments will start cracking down on cryptocurrencies by imposing regulations which could limit their growth; even attempt to take them out altogether (which would also cause it’s value go down tremendously).
Countries like China have recently banned crypto and ICOs for various reasons such as preventing scams while others might ban crypto trading all together because of factors we don’t know about yet.
Bitcoin mining is not a free and easy process.
It’s expensive to set up the infrastructure for it and you will be spending more money on electricity than what you are making from crypto coins mined.
Lastly, crypto markets can be volatile with prices swinging widely over short periods of time due to market manipulation by whales (who have enough wealth that they can move cryptocurrency prices).
This makes the market very inelastic and it can be hard to make a profit.
The market may crash if there are too many cryptocurrencies in circulation.
It is a matter of supply and demand: the more cryptocurrency that become available, the less each one will be worth unless people have enough interest to make them valuable again.
This means volatility will not only affect individual coins but also entire markets as they will be too sensitive to any new information.
Why Cryptocurrency may not Crash in the Future (7 Solid Facts!)
First, this is just my opinion and you should do your own research to make an informed decision on whether or not Cryptocurrency has the potential to be successful in the future.
Below are the list of reasons why Cryptocurrency may never ever crash:
1). Fully decentralized
There will never be a crash if the cryptocurrency market is decentralized.
This means that there are no banks, governments, or other entities controlling it and manipulating its value to their liking.
When this happens, all of the players in the game have more control over themselves which can lead to positive growth and less volatility for everyone involved.
2). Transactions are private
The transactions of cryptocurrency like Bitcoin were designed to be anonymous and pseudo-anonymous.
This means that the identity of a person or entity will never be disclosed if it is not necessary.
This can have positive effects on people who want privacy such as those in high positions, whistleblowers, or others who simply do not want their information publicly available for various reasons.
In addition, this also protects consumers from any potential credit risk due to fraud or theft because they cannot lose more than what they put into these types of currencies.
Which may increase adoption rates since there will always be enough anonymity without having your personal data taken advantage by anyone with malicious intent.
3). Lower transactional costs than fiat currency
Another reason why cryptocurrency may not crash is because of the lower transactional costs.
This includes all fees and expenses related to exchanging fiat currency for cryptocurrencies, managing them, withdrawing from an exchange or spending on a merchant site.
Which is way nicer compared to paper money.
The increased adoption rate means that merchants will need more conversions.
Which could result in higher prices than they would have with stable currencies like USD but it also means that if you had invested early enough into Bitcoin then there are less chance of extreme volatility since supply doesn’t change much when demand increases.
4). The need for a global currency
The world is becoming interconnected and more connected digitally than ever before.
This means we are able to buy goods from all over the world as long as there’s an internet connection available.
Which in turn will mean that transactions won’t be confined by borders or markets anymore.
With the fall of trade barriers between continents this could also lead to greater economic cooperation and prosperity on a much larger scale.
5). The need for a more secure payment method
Traditional financial institutions are not as safe or trustworthy as they used to be.
There’s been the 2008 banking crisis, numerous data breaches in major banks and even cases of fraud where people have lost huge amounts of money through their bank accounts.
This is all down to greed and incompetence on behalf of the banks.
Cryptocurrencies are not controlled by any one bank or government and they cannot be shut down because they’re stored on computers that aren’t tied to a particular country.
This means that there is no central point of failure, which makes them much more secure than traditional fiat currencies.
6). The need for a more stable currency
Traditional fiat currencies are very volatile.
They have huge fluctuations in value that can go from one day to the next, sometimes as much as 20%.
This is because they’re controlled by governments who print too many or too few of them based on what their needs are at any given time.
This causes their value to drop and rise, sometimes drastically.
Cryptocurrencies on the other hand are much more stable because they’re not controlled by a central government that can print as many as it needs at any given time.
They also have a set supply so no one can just suddenly release lots of new ones into the market.
7). The need for a more free society
Governments can control what’s happening with traditional fiat currencies because they have total power and authority over them.
They set the rules as to how much of it is printed, who has access to it, what its value is at any given time etc.
Agian, Cryptocurrencies are not controlled by anyone the last time I checked.
Reasons to Invest Cryptocurrency
If you’re considering to invest into the crypto market, I think the above reasons are enough to get you interested.
I’m a huge believer and investor in the crypto. If not for anything but for the fact that blockchain is here to stay.
Here are other mild reasons I recommend you should also invest (even if little) into crypto:
- Cryptocurrency can be traded and profited from
- Investing in cryptocurrency is a good way to diversify your portfolio
- You do not need any qualifications to invest in cryptocurrency, unlike stocks and shares
- There is no single point of failure because the blockchain network does not belong to one person or entity.
- The cryptocurrency market is volatile – which means there are good chances of you making a profit
- You can invest in any amount
- The cryptocurrency market has large opportunities for growth
- Fiat money is losing its value year-in-year-out
FAQ on Cryptocurrency Crashing
Is cryptocurrency going to crash to zero?
The good news is that cryptocurrencies are unlikely to crash to zero for the simple reason that they’re not backed by any single government or authority.
If one cryptocurrency crashes, there will always be others available to take its place as people’s primary currency of choice.
However, if governments around the world decided to ban all digital currencies because of bad actors using them in illicit activities like money laundering, tax evasion and terrorism financing then it is possible many would disappear overnight – including Bitcoin.
Can cryptocurrency crash the economy?
The cryptocurrency market is still in its early development stages so it will be difficult to claim whether or not the crypto market can crash the economy.
If you consider what happened with traditional currencies, they crashed many economies but they had a lot more history than cryptocurrencies do today, and there was no internet back then either.
It will take some time before we know for sure on that one.
As stated by European Central Bank (ECB): “Virtual Currencies and cryptos pose no threat to financial stability”.
This means that any crashes would come from within the currency itself as opposed to crashing an entire economic system because of their use.
What would happen if cryptocurrency crashes?
One thing I see happening if crypto crashes is that people will stop using it. If this happens, then the whole crypto market falls apart because there are no buyers and everybody is a seller.
Demand and supply is what makes an industry strive.
What would make cryptocurrency crash?
Similar as my point above, if there aren’t enough adopters and buyers keep the market afloat – it begins to crash gradually.
This is usually caused by external or real-life circumstances such as government policies, whales losing interest etc.
Then there will be a decrease in crypto demand.
Will cryptocurrency crash in 2022?
Well, we don’t know for sure. However, there are a few things that we do know about the cryptocurrency markets and what may be in store for us on the horizon.
Bitcoin’s price is largely dependent on speculation at this point – so if investors get nervous or decide to pull out of their positions en masse, it could have an effect on the market.
Will cryptocurrency crash in 2023?
Again, it’s impossible to accurately predict the future. But there are some explanations for why cryptocurrency prices have been so volatile this year that will be useful in predicting what 2022 and 2023 might hold.
Is it advisable to buy cryptocurrency coins when it’s crashing?
In my opinion and from my personal experience it totally depends.
For example, lets go back in time when the bitcoin price crashed in 2013-2014, a lot of people lost money.
If you would have bought Bitcoins at $1200 and sold them at just $250 it’s easy to assume that your losses were probably close to 100%.
However if you had taken advantage of this crash by buying bitcoins up until they bottomed out for under $200 then those who invested wisely could have made an enormous profit once Bitcoin hit $1000 dollars again six months later.
You get the point?
The key is understanding what type of investor you are, how much risk tolerance do you have?
How long will it take before you need any portion of the investment back or want to sell some cryptocurrency coins? That answer can make all the difference in whether or not to buy when the market is crashing.
How can I predict when the crypto market would crash?
As the market is still fairly new, there are no accurate ways of predicting when it would crash.
However, as time goes on and more people invest in cryptocurrency (especially institutional investors), we might see a pattern emerge that could help predict crashes before they happen.
What is a crypto correction?
A correction is a drop of an asset’s (coin/token) price by 10% or more that gets you back on track in the event of overvaluation.
Correction vs crash – what’s the difference?
A correction is a sudden, temporary decline in the market.
A crash typically refers to an extended period of time where assets are losing value and there’s no hope for recovery.
Technically anything can happen with cryptocurrencies – we could see just about any kind of extreme.
What does the bear market in crypto mean?
In simple term the bear market is when the cryptocurrency value drops and it is currently in a bear market.
What does the bull market in crypto mean?
The term bull market refers to a period of general economic prosperity.
The definition of a bull market is when the prices for cryptos, stocks or shares are going up and investors are optimistic.
Is it a good investment?
Cryptocurrency is not something you can just jump into and expect to make a lot of money, but if you are willing to do the work it could be rewarding.
Investing in Cryptocurrency is a better investment than investing in any other form of currency.
This is because it has the potential to grow and appreciate over time, unlike traditional currencies which are only worth as much as they can be traded for at that particular moment.
But it’s highly subjected to market volatility, fluctuations and risks.
Different cryptocurrencies are going to have different value.
But as time goes on it is likely that the currencies with a more long-term potential will grow in worth exponentially faster than those without much innovation or ambition.
There’s always the chance you could lose your money if anything happens to your cryptocurrency wallet.
If you’re skpetical and don’t believe in digital currencies and its impact to the future or money – don’t bother investing.
On the other hand, if you’re a firm believer like myself, start small by getting an account on Coinbase and Binance. Then learn your way up!