If you follow the news, you must have seen the news that the major cryptocurrencies have plummeted. The world’s largest cryptocurrency is at its 18-month low and has lost around 60 per cent value from its peak.
On the other hand, the second biggest cryptocurrency has also lost 25 per cent value from its peak, and other Crypto smsf story remains somewhat the same. We are in a bear market, not just the crypto, equity, and real estate and the latest layoffs from Twitter and Meta are telling us a bigger picture.
Many experts have warned that we are moving towards a possible recession, which is quite evident from major global markets.
There is nothing fundamentally wrong with cryptocurrencies, but the looming risk of inflation, rising interest rates, rising energy prices and cost of living are the major causes. Stock markets are also wobbling, with the US S&P 500 now 20% low from their highs.
As a result, the big investors are stuck in the market, and there is less liquidity, making the global market bleed. The big question is why crypto’s impact is huge compared to other investment instrument.
The answer is the great Luna-Terra crash that sent a negative sentiment across all major cryptos, and people sold their holdings, and the big crash happened. The more people pledge, the less Bitcoin is worth because that’s how it works. The effect is known as the knock-on effect of more people selling because they see the value decreasing. Unlike other more traditional assets, Bitcoin has no intrinsic value to underpin it, while other currencies have some government backing.
Interest rates, inflation and other macroeconomic factors affect crypto prices, which can affect how confident people feel in investing their money in risky alternative assets. With interest rates rising, savings accounts become more attractive, and people start putting their money in fixed deposits, further wiping out cash from the market.
Do Investors Need to Worry?
Crashes happen all the time, and once all the macro and microeconomics improve, the market rebounds and the prices start to rise again. Every time the market falls, it is a great opportunity to buy stocks and invest in SMSF Cryptocurrency, as there is a maximum chance that the market will rebound and reward all the investors. The markets have always rewarded long-term investors, be it equity or other investment options.
Crypto remains a highly speculative investment and is a good option to diversify your portfolio. With rising interest rates and a recession, try to have an emergency fund to meet your obligations. Only invest in cryptos if you feel secure and have all the knowledge, skills, and tools.