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Crash on the crypto market - opportunities and risks in the current market situation

 

The correction of the last few weeks, which was primarily due to rising interest rates, turned into a crash of enormous proportions yesterday. After a 7-day crash of almost 25%, Bitcoin is now below the psychologically important $30,000 mark. Ethereum also lost 30% in value. Terra's Luna token lost 99% of its value after losing its dollar peg and falling below $0.30. The token, which hit its all-time high at $116, is currently worth one cent.



Reasons for the crypto crash

Apart from Terra, the reason for the price losses is the US Federal Reserve's 50 basis point hike in interest rates. Higher interest rates make risky assets less attractive. A sale takes place. Cryptocurrencies are commonly considered to be one of the riskiest asset classes. Due to rising interest rates, cryptocurrencies are particularly under pressure to sell. In addition to the interest rate hikes (which have been around for some time), cryptos came under pressure, especially from Terra. Due to circumstances that have not yet been clarified, the stablecoin Luna lost its dollar peg and lost almost its entire value within a very short time. A massive loss of confidence for the entire industry, which alone in the form of the Terra token destroyed $13 billion in market capitalization.

Such a negative mood on the market amplifies the effects and the sell-off spirals.


Even if the rate hikes have been fixed for some time, not all risks are necessarily priced into the prices at the moment. The market is currently fearing further rate hikes by the FED. This would make the “crypto” investment case even less attractive.

Furthermore, young tokens and projects in particular live from trust - once this trust, as in the case of Terra, is destroyed, the entire industry loses credibility. In particular, future visions such as DeFi are then called into question. In addition, such price fluctuations make the market more skeptical.



opportunities

Where there are high risks, there are usually also high opportunities. Many cryptocurrency and tokens are currently priced lower than ever - often below the ICO price. This allows you to pick up huge bargains. In particular, promising projects such as Fantom or Avalanche are currently cheaper than ever. The top dogs Bitcoin and Ethereum are also well below their all-time highs. If you want to act anti-cyclically, you could get in now.


In addition, the projects live on. If you invested in Ethereum because you believe in blockchain, smart contracts, NFT and all the other innovations, then the investment case is the same. The blockchain is the same. Developers are still working to push your tokens and projects or blockchains. Only the price has changed. It is now up to you to determine whether only the price has changed or whether the value has changed as well.


In times of crisis, tomorrow's winners are formed. Not every project and every token will survive due to the outflow of funds. According to Darwin, in nature only the strong will survive - it's the same in the crypto market. It is sifted out. Which project is really promising, future-oriented and offers opportunities? Or which project is just a copy, a fun token or something similar? Those who invest in the winners now can benefit twice over later because the competition has been screened out.


Should I Buy Cryptos Now?

The market currently harbors high risks. Rising interest rates, lost confidence and flagging interest could weigh on the industry over the long term. On the other hand, there is the opportunity to invest in the technology of tomorrow - at prices that have rarely been seen. It is important to find out what intrinsic value you get for what price. Buy future-oriented, promising projects.

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