The crypto market has been hit hard this week, with major coins recording their lowest price in months following an extended period of volatile trading. Bitcoin, the world’s most traded cryptocurrency, plummeted to $26,000 on Monday, causing a bloodbath among other virtual assets. Meanwhile, Ripple’s XRP, the third-largest crypto, led the altcoin downfall.
1. Crypto Bloodbath as Bitcoin Tumbles to $26K
Cryptocurrencies markets have taken a beating this month, as a result of Bitcoin’s historic plunge in value. Prices had climbed to a new all-time high of $42,000 on January 8, but by January 21, the price had plummeted to the low of $26,000.
The major catalyst for this major downturn has been attributed to Elon Musk and his electric car company Tesla Inc. Tesla had revealed it had bought $1.5 billion worth of Bitcoin, fueling the rise. However, Musk later renounced the purchase, resulting in a large sell-off from Asian markets. This was further compounded by comments from Chinese authorities about a ban on crypto mining and trading.
As of yet, it is unclear how much further Bitcoin will fall in price, or when an upturn may come. But one thing is certain: this crypto-market bloodbath has caused quite a stir. With Bitcoin’s price going from strength-to-strength to then crashing so low, investors have been left nervously looking at their portfolios.
Here are some key takeaways from the bloodbath:
- Bitcoin’s sudden fall has been attributed to pressure from Tesla CEO Elon Musk and authorities in China
- The downturn has caused a large sell-off from Asian markets
- It is unclear how much further Bitcoin’s price will fall, or when an upturn may come
- Investors have been left nervously wondering what happens next
2. XRP Leads the Altcoins Downfall
XRP in Financial Trouble
The performance of XRP in the cryptocurrency markets has been abysmal in recent weeks, causing a lot of concern among users and investors. The amount of XRP traded over the past week is 68% lower than it was in February, and the 7-day average price of XRP has dropped to the lowest level it’s been since April 2019. Additionally, XRP is down by about a third since its peak in early April this year.
The decrease in value has been so severe that it’s had a negative impact on other cryptocurrencies as well. Many investors have found that investing in XRP is a risky affair and have taken the significant losses as a sign to shift away from altcoin investing in general.
Market Forces at Play
There are a few key factors that have combined to drag XRP’s market price downwards. Regulatory concerns are at the top of the list, as the US Securities and Exchange Commission (SEC) has filed a lawsuit alleging that XRP’s issuer, Ripple Labs, has been selling unregistered securities.
Furthermore, several major exchanges have announced that they won’t be listing XRP in the near future, which further reduces investment opportunity in the cryptocurrency. Finally, Bitcoin’s continued price movement has kept potential investors out of the cryptomarket, which has further presented difficulties for altcoins, particularly XRP.
Further Anxiety for XRP Holders
These market movements have led to a lot of unease among XRP holders who are uncertain as to how much they’ll be able to recoup. Even as the situation looks bleak, investors remain hopeful that key exchanges like Coinbase will eventually change their stance and the possibility of a SEC settlement could bring much-needed positive news about the currency.
At the moment, however, the outlook for XRP is uncertain and until more concrete steps are taken, it’s likely that its value will remain low.
Taking a Different Route
Investors holding XRP have the option of switching to other cryptocurrencies for a more certain return on investment. Ethereum and Litecoin have seen steady growth in recent months and are likely to be better options in the near future.
It’s also worth considering a mixed portfolio strategy that takes into account the upcoming changes in the cryptomarket. This could potentially minimise losses while ensuring greater security in investments.
3. Assessing Crypto Market Volatility
Understand Crypto Market Movements
Crypto markets are notoriously volatile, and it is difficult to predict the direction of movements and account for them in an investment strategy. To assess market volatility and assess risk, investors and traders should understand how various factors affect the overall crypto market.
News
Generally speaking, news can have a significant impact on market volatility. Positive news stories, such as a major technological advance or a large stock-market listing, can cause prices to surge. Similarly, negative news, such as that related to regulatory changes or a hack, can send prices tumbling. Keeping up to date with industry news is therefore key for crypto market volatility assessment.
Demand
Demand is another major factor affecting crypto market volatility. Factors such as economic performance, investor sentiment and trading volume can all impact prices. If the demand for a particular asset increases, then prices are likely to rise, whereas a decrease in demand can cause a decrease in price.
Correlation
It is important to consider the correlation between crypto assets when assessing market volatility. The price of a single asset is highly volatile, but correlations between assets can indicate trends in the overall crypto market. If assets display strong positive correlations, then the price of one rising will likely cause another to rise as well. On the other hand, weaker correlations can give investors more opportunities for diversification.
4. Looking Ahead: Charting a Path Forward for Crypto
The world of crypto is growing more complex by the year and shows no sign of slowing down. It can be difficult to keep up with the landscape and know where to invest or speculate your resources. Fortunately, by understanding the fundamentals, it’s possible to cut through the noise and stay ahead of the curve. Here are four strategies to help you project where the crypto markets may be headed and plan accordingly.
- Keep an eye on developments. Crypto is a highly progressive and ever-changing space. Keeping tabs on announcements from major technology players, updates to regulations, new entrants in the marketplace, news about mergers and acquisitions, and other news stories are a great way to stay abreast of the latest developments.
- Watch the trends. It’s also important to take note of the larger trends in crypto. Pay attention to research papers that come out, new tokens and coins, new projects and platforms, and changes to global investment flows. Knowing which direction markets are heading and how different products, platforms and currencies compare is invaluable.
- Monitor insights. While keeping up with the trends is important, being able to make sense of the numbers is equally essential. Keeping close tabs on key performance metrics and industry indicators can give you an edge on the competition and ensure you’re able to make the most informed decisions.
- Gather feedback. Don’t be afraid to ask around and take the temperature of the room. Talking to industry veterans, the media, and individuals with similar interests and expertise can provide great insight into where crypto is going, and what opportunities or pitfalls may lie ahead.
Following these four steps can help crypto investors stay sharp and stay ahead of the pack. With the right tools, resources, and connections, you can stay on top of the markets and make the most of your investments.
Of course, there is no surefire way to know where the crypto markets are heading. As with any investment opportunity, risk is always present and your results may vary. Since there are no guarantees, it’s important to do your due diligence and make sure you are comfortable with the risks.
Overall the crypto market took a serious hit this week. While Bitcoin’s downward spiral to $26K was the most notable event, XRP led a sell-off by altcoins that hit the entire crypto market. To stabilize, the crypto space needs a bounce-back-and soon. Until then, a volatile market is all the crypto space can expect.
