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The cause of this descending trend in the cryptocurrency market is unclear, but it is likely the result of a combination of factors.
Crypto Market Continues To Plunge In 2023
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The entire digital currency market is currently experiencing a significant decline and it appears that it will continue for some time. Many digital coins and tokens are experiencing particularly severe losses.
FTT, the native token of the FTX exchange, has reached an all-time low due to the recent scandal involving the exchange. FTT, which was valued at $26 on September 1, 2022, is now trading below $1. Other currencies, such as Solana (SOL), which is sometimes referred to as the "Ethereum killer," have also seen significant declines. Solana was trading at its highest level in the last three months, $37, on November 6, 2022, but has now reached its lowest point at $12.
Other alternative coins such as Filecoin (FIL), Storj (STORJ), Decentraland (MANA), Apecoin (APE), and Flow (FLOW) have experienced significant declines, with an average decrease of 20-40% since November 2022.
The two largest cryptocurrencies by trading volume and market capitalization, Bitcoin (BTC) and Ethereum (ETH), have seen significant falls as a result of the crash of the FTX exchange. Bitcoin is currently trading around $16,000, and Ethereum, which reached a peak of $4,900 earlier in the year, is now trading at $1,200 as of December 20, 2022.
In contrast, Ripple (XRP) and Binance Coin (BNP) have not experienced as much decline, but they are still down by about 9% and 7% respectively. Tether (USDT), USD Coin (USDC), Dai (DAI), and TRON (TRX) are among the top performers on December 20, 2022.
Read More: What is Bitcoin Mining? How Does It Work ?
Reasons Behind Crypto Collapse In 2022
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The cryptocurrency market has been highly volatile in 2022, and has been significantly impacted by the bankruptcy of one of the largest global cryptocurrency exchanges, FTX. The downfall of FTX and its dispute with Binance have not only led to a massive sell-off in the market, but has also reduced liquidity in the crypto market.
Binance, the largest global cryptocurrency platform, had planned to acquire rival FTX, but ultimately backed out of the deal due to issues with FTX's finances and regulatory investigations. This decision surprised many investors and caused Bitcoin to drop to its lowest level in two years, after reaching an all-time high of $69,000 in November 2021.
These unexpected developments have led to a chaotic situation in the cryptocurrency industry, causing a high level of mistrust and skepticism among investors towards centralized crypto establishments and regulations.
The fallout of FTX has had a ripple effect on the market, leading to questions about the survival of other trading and lending firms such as Gemini and Coinbase. Experts believe that their survival is closely tied to their regulatory compliance, governance, and management practices.
In addition to the sudden collapse of FTX and its impact on the market, rising interest rates and the recent hawkish tone of the U.S. Federal Reserve's tighter monetary policy have also contributed to the current market conditions.
Is It Safe To Invest In Cryptocurrency Right Now?
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This is not the first time that Indian cryptocurrency investors have experienced such extreme volatility. Whether it be the crash of Terra-Luna, the Russia-Ukraine war, new crypto tax laws, or now the collapse of FTX, investors are learning to deal with such situations and are calling for better rules for operational transparency, governance, and regulations.
The series of unfortunate events over the past year have had a significant negative impact on Indian investor sentiment. Investors are now taking a more cautious approach and paying more attention to the transparency and collateral usage of the digital assets they have invested in.
In the wake of the FTX collapse, it is highly recommended that investors only invest in assets they fully understand and that are regulated. Whether buying during market dips or waiting for the market to recover, it is important for crypto investors to take the FTX situation as a wake-up call and to thoroughly research the cryptocurrency market before investing. It is also recommended to only invest 5-10% of your portfolio in digital coins.
Step-by-Step Guide On How To Invest In Indian Cryptocurrency Market
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- Choose a Cryptocurrency: Select a digital coin in which you want to invest. Similar to other asset classes, each cryptocurrency has its own unique characteristics and is supported by different blockchain networks, mining methods, and intrinsic value. Since cryptocurrencies can be highly volatile, it is essential to thoroughly research the options before deciding how much money to invest in a specific cryptocurrency.
- Choose a Cryptocurrency Exchange: To purchase cryptocurrency, it is necessary to have an account with a cryptocurrency exchange. A cryptocurrency exchange is an online platform that allows you to buy or sell digital coins. To learn about the best cryptocurrency exchanges in India, you can read our article "Compare Crypto Exchanges in India" for more information on different exchanges.
Once you have chosen a cryptocurrency exchange, you will need to register by providing personal information such as your name, address, and completing the necessary Know Your Customer (KYC) procedures. After completing the registration process, you will receive a deposit address from the platform. Once you have this, you are ready to invest.
- Select a Suitable Payment Method: After you have chosen a cryptocurrency exchange, make sure to also select a convenient online payment method such as credit/debit cards, instant bank transfers, peer-to-peer options (P2P), or a crypto wallet. You will need to add funds to your payment gateway in order to purchase a digital coin.
- Buy Cryptocurrency: After adding funds, you can now easily purchase your chosen cryptocurrency. After logging into the crypto platform and adding funds, you will need to select your desired digital coin from the options listed, which will be displayed with their current market price, total volume, exchange symbol, and other relevant market information. To make the purchase, click on the "buy" tab.
- Securely Store your Cryptocurrency: Once you have received your digital coins in exchange for fiat currency, it is important to store them securely. Keep in mind that cryptocurrencies are not backed by any regulated entity, making them vulnerable to theft or hacking.
Many exchanges offer online wallet options, but some investors prefer to use cold storage, which allows you to keep your coins offline. Cold wallets are not connected to the internet, making them one of the safest ways to hold cryptocurrencies.
- "Sell" at the Right Time: This is an important step that allows you to make a profit from investing in a digital coin. In the same way that you placed an order to "buy" cryptocurrency, you can also sell your cryptocurrency by clicking the "sell" tab in your portfolio. Investors have the option to sell their investment fully or partially, depending on their own decision. It is crucial to take profits in a timely manner.
Bottom Line
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The collapse of a large global exchange like FTX and concerns about rising inflation and higher interest rates have greatly damaged investor confidence, causing them to hesitate to make new investments in the market.
Given the current uncertainty and macroeconomic conditions worldwide, it is wise to approach the market with caution. Now is a good time to closely observe the details of the cryptocurrency market and avoid impulsive and reckless decisions.
It's possible that once the chaos subsides, crypto investors may find their preferred digital assets at a more reasonable value.
Read More: How to Buy SafeMoon
Source: https://www.forbes.com
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