Is Crypto Dead? The price of Bitcoin is down 55.55% year-to-date and that has led to the speculation that it is dead and its price will never recover. In the past year, it has fluctuated between a high of $68,789 and a low of $17,708, supporting its extreme volatility and giving Bitcoin critics ample evidence to support their claim that Bitcoin is no longer viable.
According to Bitcoin content website 99 Bitcoins, 17 credible news sources and celebrities have announced that Bitcoin is dead, with the latest article coming from American Left-based magazine Jacobin.
If the price of oil -another commodity- crashed by 55.55% in six months, would you say that oil is dead? Any reasonable stakeholder in the oil market would consider the fundamentals of the oil market, such as demand, supply, government policies, competing energy sources, and so on.
If all of the factors turned out to be relatively positive, the price drop would begin to look like an opportunity. So, what are the most important Bitcoin fundamentals to keep in mind?
What Is Crypto?
Cryptocurrency, also known as crypto, is a form of digital currency that only exists virtually and uses cryptography to keep transactions secure and prevent counterfeiting.
Crypto doesn’t have a central issuing authority, like a Federal Reserve; instead, transactions and new units are recorded in a decentralized system called a blockchain.
Why Did Crypto Crash?
Is Crypto Dead?: The crypto market’s decline is driven by multiple factors, including the global economic downturn, rising inflation, and stricter monetary policies, reducing consumer purchasing power and leading investors to move away from high-risk assets like cryptocurrency.
Loss of trust is another significant factor affecting the market.
Two events that damaged trust were the collapse of Terra Luna, resulting in a loss of over $60 billion for investors, and the FTX bankruptcy, owing over $3 billion to more than a million users.
Is It Safe To Invest In Crypto Now?
To assess the safety of investing in crypto, it’s crucial to understand crypto bear markets, characterized by supply surpassing demand, confidence decline, and decreasing prices lasting from 6 months to 2 years.
Crypto markets are smaller and more volatile than traditional ones, leading to prolonged bear markets with drops up to 85%.
Despite a 75% drop from its all-time highs in late 2021, the conclusion of the bear market may be approaching.
Investing in crypto requires belief in its unchanged value proposition and concept, regardless of price fluctuations.
However, it involves extreme risk and regulatory uncertainty, necessitating strong conviction in crypto’s use cases.
Safety depends on individual risk tolerance and investing strategy. Although the crypto market is expected to recover in the long run, short-term declines are likely, and success isn’t guaranteed.
Manage risk, stay informed, and remain calm during turbulent times.
What Is Bitcoin Hash Rate?
This refers to the total amount of computing power used by the Bitcoin network. It assists Bitcoin stakeholders in estimating the network’s level of decentralization and security.
According to digital assets company Blockchain.com, the Bitcoin hash rate has been in a bullish trend and it reached an all-time high on June 12, 2022.
This indicates that the amount of computing power dedicated to supporting the Bitcoin network is trending close to its all-time high and that the Bitcoin network has never been more secure.
When Bitcoin’s price fell below $20,000 two weeks ago, some miners were mining Bitcoin at a loss, according to cryptocurrency ranking platform CryptoRank.io.
That is, the cost of mining one Bitcoin was significantly higher than the price of Bitcoin. So, why would miners push the hash rate to an all-time high when the value of each Bitcoin mined was close to or less than the production cost?
Bitcoin Supply
Bitcoin has a limited supply of 21 million coins, of which slightly over 19 million coins have already been mined, leaving approximately two million yet to be mined.
Satoshi Nakamoto mined around one million bitcoins, which remain locked in their initial wallet indefinitely.
Over the years, people have misplaced the private keys to their Bitcoin wallets, potentially resulting in the permanent loss of the Bitcoins stored in those wallets.
As a result, there are many Bitcoins out of circulation, making Bitcoin the hardest asset to obtain due to the costly mining process and the fixed market cap of 21 million.
The increasing institutional adoption of Bitcoin indicates a tightening supply ahead.
More institutions seek to add Bitcoin exposure to their balance sheets.