Crypto winter despite hopes of new peak levels
When last year came to an end, it was with hopes that 2022 would be the year when pandemic and economic unrest were left behind. As recently as November, both Bitcoin and Ether showed strengths at peak levels of over $ 67,000 (Bitcoin) and $ 4,800 (Ether), which led many crypto investors to expect even higher levels in 2022, especially as US inflation data gained momentum and showed at significantly higher levels than central banks had expected.
When last year came to an end, it was with
hopes that 2022 would be the year when pandemic and economic unrest were left
behind. As recently as November, both Bitcoin and Ether showed strengths at
peak levels of over $ 67,000 (Bitcoin) and $ 4,800 (Ether), which led many
crypto investors to expect even higher levels in 2022, especially as US
inflation data gained momentum and showed at significantly higher levels than
central banks had expected.
However, there have been no new top levels and
the price of Bitcoin has instead fallen over 70 percent and is now trading
around 20,000 USD while Ether has fallen to around 1000 USD, or almost 80
percent from the top.
For the investor who has been in
cryptocurrencies for more than the past two years, however, the recent crash
will not come as a major shock, as Bitcoin in 2017 rose from around 700 USD to
a maximum of close to 20,000 USD before the price even then fell sharply to
just over $ 3,000 as a minimum.
Despite a fall of more than 80 percent,
however, the crypto world did not die in 2018, nor will it this winter.
Instead, the fall in prices may mean an opportunity for investors to accumulate
more coins if the cryptographers take off again.
For those who are surprised to see how crypto
prices have fallen despite US inflation rising to a 40-year high, it has little
to do with the role of cryptocurrency as an inflation hedge, but more with the
fact that correlation is not a constant measure, but changes over time during
various market events. During periods of high inflation, for example, the
correlation between different asset classes tends to rise.
The timing of the most attractive position to
invest in crypto is, as with all other assets, difficult to pinpoint. But, if
the future will repeat similar patterns as those we have seen before (there is
no certainty though), the decline will usually be about a year before another
couple of years of cancer, which will eventually turn into an upside rally.
This means that even if we have not really seen a bottom yet, it may still be
time to slowly start scaling in at these levels.
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