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Posted by Dan Akister on 17-Jun-2022 09:14:51

Has crypto died and gone to mining heaven?

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Lately cryptocurrency has taken a huge nosedive in value. Almost all markets have seen an almighty crash of late, dropping even lower than predictions. At one point the market was worth over $3 trillion. Since November 2021, Bitcoin (the most popular and most valuable) has declined in value by 70%, down from its high of $69,000 for 1 bitcoin.

What happened?
It’s difficult to point to one particular reason, but it’s likely that a multitude of factors has resulted in a monumental crash. There’s a lack of regulation within the market, it’s literally still “the Wild West” in terms of who can trade, what it’s used for and how it accumulates. A lack of regulation within the market has at this point turned a lot of people away from it. It’s renowned as a very volatile market and the whole thing can be turned around by a tweet from prominent investors. There’s also the rise in energy costs, meaning it costs more to mine - this was already becoming less cost effective with the finite amount of crypto in existence, and more mining needed to be done to achieve the same results as in the previous few years. Combine this with the lack of confidence in some world markets and the increasing cost of living, and crypto loses its value side-by-side with real currency that can be more readily traded.

Cryptowinter
All these factors point towards a “cryptowinter” which means that prices will fall and stay low for some time. This would be a very poor time to get “into” crypto as it doesn’t look like there will be much in terms of recovery predictions for quite some time. When a currency declines in value to the point where almost everyone who has large amounts of it has sold up, that leaves behind investors who are in the “mid” tier. The “whales” have seen this happening and can afford their losses or will have gotten out already. These are the people who have diverse investment portfolios and will have significant safety measures to absorb these losses. “Lower tier” investors or “speculators” will not affect the market in a big way, if they’ve invested they’ll naturally be affected, but not to the point where it could be life affecting. The “mid” tier will control how the market goes from here. These are the serious investors who have large investments and if they start selling, then prices will go down even further.

 

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Recovery predictions?
Nothing in the near future points to the market recovering quickly. The rise in energy prices has made farming new currency harder and less cost effective. The lack of regulation within the market means that there’s always a high “risk” element associated with crypto and this is happening at a time where economic stability is of paramount importance due to world events and a possible global recession. There is a multitude of different currencies out there, so reinvestment in the future would be across far more than the inception. Bitcoin, Ethereum, Dogecoin, Litecoin etc. there’s so many to choose from and each one is  as unpredictable as the next. The reduction in demand for crypto is only a good thing for consumers. The semi-conductor shortage caused issues for businesses and personal use of computing across the world because “miners'' would take CPUs, GPUs and cooling units. Hopefully, global demand will decrease and people will finally be able to equip themselves at a fair price.

Topics: Cryptocurrency

Dan Akister

Written by Dan Akister

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