Crypto News

What the recent slump means for digital currencies such as bitcoin and ethereum

The vertically growing crypto market has seen a dip for a few weeks now. The Bitcoin price and other altcoins seemed unstoppable, but suddenly it hit a roadblock. It dropped from $63,000 highs to below $33,000 lows.

It was dubbed a social media-driven or tweet-driven fall by many, while others called it a weak asset and had no future. The fall also meant that small and retail investors who missed the train were left behind, prompting concerns in regulatory corridors about investors’ protection against volatile assets.

While it is true that crypto assets have fallen sharply, this has had a negative impact on many investors’ capitals. However, the volatility of these assets is not something you would see in other asset classes. This does not make them a danger to the investor community or a scam. These corrections have been beneficial for both the cryptocurrency market as well as the entire blockchain industry.

Here are a few reasons why crypto markets and the industry will benefit from a fall in crypto markets.

Eliminates malicious individuals from the system

As crypto prices rise, the focus shifts to attracting investors and traders to invest. The new investors also rush to get on the bandwagon to make quick cash from market pumps in FOMO (fear not missing out).

This allows many evil characters and fly by night operators to escape. Initial coin offerings (The ICO (Information Sharing and Commerce) craze is back in 2017We were exposed to many scams and false claims that led to investors being duped by fraudulent companies and projects. These projects took advantage massive price increases and deceived customers with false return claims. They then fled with their money.

The bubble that was too high in value is deflated

The overflowing liquidity that investors and traders use to make quick cash is the main reason why crypto prices tend to spike vertically. This creates a bubble-like environment in which token prices continue to soar day after day, resulting in repetitive ATH (All Time High).

The prices do not have a set price and are based purely on supply and demand. This causes a huge spike in prices, which absorbs all of the liquidity that is available to new investors and traders who are looking for quick profits. As soon as there are signs of the downturn, investors and traders who have FOMO begin to dump their coins. This causes a huge drop in the price which eventually settles at a reasonable value.

The focus shifts away from the prices to the fundamentals

The unnecessary attention that small coins and token prices receive when the crypto markets collapse is much less. Stakeholders including investors, founders and others shift their attention to something more meaningful – development and innovation – something this industry is thriving on.

Stakeholders can become distracted by price movements of tokens when prices rise. The price is the ultimate measure of the project’s creditworthiness or success. When the prices of cryptocurrency fall, investors, founders and other stakeholders can focus on the real fundamentals of the projects and make decisions that support the price.

As the focus shifts to BUIDL, recruitment spikes (crypto slang term for BUILD)

Investors are shifting to the fundamentals. Credible projects begin to recruit great talent. The focus is on building products and projects that can be used. Tokens and coins increase in value organically, not through price pumping. These are the best times to invest because the valuations can be reasonable and they can see their money being used to build the product and not in activities that will keep their coins in focus. Investors who are willing to grab any coin as the market swings upwards love these times.

The heap is divided into separate projects

Today, there are more than 10000 crypto currencies. Although all projects have a purpose and some are more successful than others, there are some that are fundamentally weaker than other. This could be due to a variety of reasons. These projects are not malicious or scams. Each project has its own growth stage which makes them stronger or less powerful than others. The fall of the most fundamentally strong projects is usually less than that of the weaker ones when crypto markets are correct.

This helps traders and investors to distinguish between superior projects and allows them to pick up the right coins that are otherwise difficult to find in rising markets. Investors also make mistakes when trying to distinguish the truth from rumors, as all the news is constantly changing.

It’s easier to work with regulators

Anyone who has ever been involved in the crypto markets or followed them for a while will know that regulatory concerns pose the greatest threat to the sector. When cryptocurrencies prices are spiraling upwards, regulators get jittery and are often busy protecting small investors from manipulations.

They have very little time to discuss the issues and develop policies and frameworks that will help to boost the cryptocurrency industry. However, when crypto markets drop below their support levels, they move sideways or range bound. This creates an atmosphere of calmness that allows industry participants to collaborate with regulators for the benefit of the industry.

While many people may be afraid of price corrections in crypto markets, they are actually good for the industry’s growth, at least until it is in its early stages of growth. It helps to maintain a healthy streamlining process, which makes it stable and free from turbulence.