Cryptocurrencies Crash – Who’s Most Affected

After some got rich quickly with crypto values, there are now many losers. The end of the descent is open. The most important questions and answers.

Are cryptocurrencies about to crash?

Digital currencies like Bitcoin and others have been losing massively in value for some time. Last November, the largest cryptocurrency, Bitcoin, was listed at a record value of more than $68,000. Last week it was just $19,000 at a snapshot. The second largest digital currency, Ethereum, lost 70 percent of its value in the same period and currently costs around $1,000. The courses fluctuate considerably during the course of the day. How to proceed is open.

Why have bitcoin and other assets fallen so much?

There are several reasons for the sell-off in crypto assets. Many investors sell their bitcoin. Last year there was still 1.3 trillion dollars in this value, currently it is only 322 billion dollars. When there are more sellers than buyers, prices are bound to fall. “The framework conditions are extremely difficult,” says the crypto analyst at DZ-Bank, Sören Hettler, “so institutional investors are parting with risky assets.”

Bitcoin falls to its lowest level in a year and a half

The central banks would also now resolutely fight inflation. This eliminates an argument for buying crypto assets. Experts see the turnaround in interest rates as one of the main reasons for the behavior of professional investors. The central banks are raising interest rates. This means investing elsewhere, such as in government bonds, is becoming more attractive again.

How safe are investments in cryptocurrencies?

Adding to all the substantive reasons for a sell-off is a significant loss of confidence in the security of digital money. Because some providers of investments related to crypto assets are in trouble. The company Celsius Network has stopped paying out customer funds due to payment difficulties. Insolvency of the platform for crypto assets cannot be ruled out. Crypto fans are angry in internet forums because Celsius has nevertheless advertised with promises of high interest rates.

Investor protection, such as deposit insurance at conventional banks, does not exist in this market. In the worst case, the savers’ money is gone. There is also unrest on the market for so-called stablecoins, the value of which is said to be secured with real dollars or commodities. Investors in the digital money Terra experienced the collapse of the system in May. All of this shakes confidence in the currencies, which also have no intrinsic value.

Is This the Prelude to the End of Crypto Assets?

Many experts are expecting a market shakeout in which some of the many different crypto assets will disappear again. But the technology behind Bitcoin & Co and based on algorithms will probably continue to be used. Hettler firmly believes that the two greatest assets, Bitcoin and Ethereum, will continue to exist. “There is a convinced fan base that wants a currency that is independent of states and central banks,” says the DZ analyst. This was an important driving force for many buyers right from the start.

Is it worth buying Bitcoin or Ethereum now?

A reliable forecast of future performance is not possible, as a look at the past shows. In 2020, the forecasts published by the Bloomberg news agency for the development of the Bitcoin price ranged from $25,000 to $300,000. Some augurs rely on the empirical value that Bitcoin has never fallen below the starting line of the last major price increase.

Savings Banks Association puts the brakes on bitcoin trading

Savings Banks Association puts the brakes on bitcoin trading

That would currently be a low of $10,000. “Regardless of the time of entry, there will always be strong price fluctuations,” warns Hettler. As an investment, he still considers the two most important digital currencies to be suitable under certain conditions. “Investors should look at it as a long-term investment and only invest money they can afford to lose,” advises the expert. Others are skeptical. The German Savings Banks and Giro Association (DSGV) recently decided that the institutes would not make any corresponding offers because of the high risk.

How do these virtual values ​​work?

Cryptocurrencies are an application of blockchain technology. To put it simply, they are generated in a way that everyone can understand with the help of extensive computing power, the so-called mining. This requires a lot of electricity. At the end there is a bitcoin, for example. This virtual coin is kept in an electronic purse, the wallet. This could be a hard drive, for example. Currencies are bought or sold on trading platforms, then for real money.

Where do experts see a lasting benefit of crypto assets?

Blockchain technology also enables other useful applications that go well beyond digital money. This allows identities to be securely assigned and access rights granted, for example to patents or licenses. Assets ranging from art to securities can also be divided into any number of shares and sold. The DSGV sees enormous potential in this, for example for the real estate market. “The blockchain technology will probably change this area of ​​the financial market, even revolutionize it,” believe the economists of the savings banks.

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