Since the early stages of 2022, the crypto market has been imploding without sustaining any recovery.
Many leading crypto marketing services have suggested that this downfall had been a long time coming. In particular, since the FTX collapse in November. If you are a crypto business or avid investor, you might be watching the market with keen eyes – wishing to spot some positive signs.
Read on to find out about the potential crypto market rebound that may happen in the year 2023, along with potential trends.
What Caused The Crypto Crash?
The crypto market implosion has been caused by many factors – two to be more precise. These factors caused the investors to flee the scene, further inflicting pressure.
The first factor is macroeconomic volatility. Digital assets like cryptos are extremely susceptible to market sentiment. Thus, there will be exciting investors in large numbers trying to leverage the moment.
In that context, the US Federal Reserve Report of rising interest rates have caused many investors to rip off their investments, causing stock values to fall significantly.
The second factor is more direct and incisive. Several crypto banks have collapsed over the years, causing a global financial crisis. It started in May when Terra/Luna stablecoins fell to $0. This caused many businesses to file for bankruptcy.
Subsequently, many crypto coins have fallen in value leading to a ripple effect that didn’t give any chance to businesses to stop the cash flow.
As a result, businesses took huge risks by borrowing more to pump the crypto value. And these risks never paid off.
What Can We Learn From This Crypto Crash?
Downfalls are sure to teach some important lessons. As a crypto business or investor, you must pay attention to the lessons that the market crash has taught us over the months.
First, the entire crypto ecosystem was borrowing fiat money. There were no virtual investments of 0s and 1s. Businesses have literally pumped real-life money to fuel the crypto market, and when interest rates hit the sky, it wiped billions of dollars from their balance sheets.
Secondly, the world has learned that the decentralized crypto market is not totally decentralized. Many exchanges had centralized platforms and concentrated power. The effects are more severe than in traditional financial markets.
Third, the crypto market is not circular. Many experts are comparing the market structure to a triangle like the infamous Ponzi Scheme of the 1800s. The circular structure has been the main reason for the downfall, as the depreciation of one token had its toll on the other tokens in the market.
When Will The Crypto Market Recover?
As with any other market, the crypto landscape will also recover. Particularly when the Federal Reserve snubs aggressive monetary policy. Experts predict that this could happen in the middle of 2023 when the microeconomic inflation subsides.
The recent Fed update of slowed-down rate hikes also serves as a dose of optimism. We can expect more positive outcomes as the year progresses.
Crypto prices may also rise gradually. Hence, it is the best time for investors to stock quality assets at cheap rates. They can also try Dollar-cost averaging to reduce risks while minimizing average cost per unit.
More importantly, we would also see the regulation of cryptocurrencies, as the market crash has shown its inherent volatility. There is hope to see clear standards and frameworks in place to re-establish reliability in the market.
Considering all these points, we believe it is time for crypto businesses and investors to make smarter movers by devising diligent investment strategies that work best for them by delivering positive return numbers.
Every financial market is bound to crash. Similarly, each carries the potential to bounce back. The same applies to the crypto market. The year 2022 has taught us to be more safe and reasonable with the investment. Let’s hope for a better 2023 and beyond.