It’s been a tough year for Bitcoin. After reaching an all-time high of $68,789 in November 2021, it has fallen to about a third of that value.
Some analysts say this is just a correction for this speculative and volatile asset, while others are much more damning, likening it to a house of cards built on an unstable foundation.
And yet, many famous American investors continue to believe in crypto, with celebrities from all corners like Kevin O’Leary, Edward Snowden, Snoop Dogg and Mike Tyson all encouraging investors remain optimistic through the downtrend.
‘It’s like a forest fire,’ Edward Snowden, NSA whistleblower and former CIA contractor told the crowd at a conference in mid-June. “When the ground has been cleared, things will grow back.”
But some experts aren’t sure what we’ll find when the ashes disappear.
There is always a huge enthusiasm
Celebrity investor Kevin O’Leary is particularly bullish on crypto. In an interview with CNBC in June, he argued that the asset had “so much intellectual capacity” and that the “next brainchild” would come from the channel’s community.
“If you go into any cohort of graduates, go into engineering, a third of them would want to work in the chain. They don’t want to work in all 11 sectors of the economy, they want something new,” the Shark Tank investor said.
O’Leary also reminded viewers that Amazon once saw corrections of up to 50% daily for 12 years before becoming the giant it is today.
Jacob, a crypto enthusiast who only goes by his first name, is a perfect example of the engineers referenced by O’Leary who are eager to work at the chain. He works as an engineer on Web2 and Web3, or the version of the internet that most people are familiar with and its next decentralized iteration where applications run on the blockchain or through peer-to-peer systems.
What Jacob says has solidified his interest in cryptocurrency are its many uses for the average person, such as “real-time money transfers, low transaction fees, high-risk investment opportunities but attractive, crowd investing in Web3 companies and, more importantly, digital”. ownership.”
So why is the value of crypto falling?
Even with celebrities and regular Americans behind it, there’s no denying that the value of crypto has fallen this year. Patrick Thompson, host of the “More Than Money” blockchain and digital asset podcast, sees a few reasons for this.
The first is inflation. And the economic policy changes governments around the world moved in to fight it, which likely “triggered the initial sell-off of all risky assets,” Thompson said.
And with more and more signs pointing to the possibility of recessionthese risky assets have become unpalatable even for some moderately risky investors.
This economic instability has also exposed some flaws in the cryptocurrency industry. Thompson acknowledges it’s a “house of cards,” adding, “It’s an industry built on an extremely shaky foundation.”
“A lot of the biggest companies in the cryptocurrency industry had very high risk business models and were over-leveraged,” Thompson said.
But Merav Ozair, blockchain expert and professor of FinTech at Rutgers Business School, says what differentiates this crypto winter from previous downturns is that its speculative nature isn’t entirely to blame.
“The crypto market today is highly correlated and in sync with everything that’s happening in the economy and with other asset classes,” Ozair says. “So if everything suffers, the crypto market will also suffer.”
Thompson adds that this provides important context as to why investors withdrew $453 million from their Bitcoin holdings in a single week in June.
“Why would anyone want to hold an asset that will most likely decline in value in the short term?”
“Sometimes you have to cut off your finger to save your hand, sell assets now so your total losses aren’t as damaging as they could be,” he says.
This does not discourage investors
Still, Thompson would still describe himself as “optimistic” about crypto – and he’s not the only one.
A Voyager Digital survey shows that around 64% of Americans think crypto will gain in value in 2022, with 37% saying they are moderately or very likely to buy cryptocurrency this year.
About half of respondents believe crypto will gain wider acceptance over the next three years.
While blockchain technology has only been around since 2008, Ozair points out that “it happened in any early tech industry,” citing the dotcom bubble and the Dot Com crash.
She predicts that the crypto industry will take a growth model similar to that of the technology sector once did when thousands of companies disappeared only for big competitors like Google, Amazon and Facebook to emerge victorious.
“[Speculators] probably have confidence that this time won’t be different,” says Thompson.
Crypto innovation wins hearts and minds
Asked what he sees in cryptography and the underlying blockchain technology, Thompson senses great potential for growth.
“I’ve seen companies use blockchain in their tech stacks to build solutions that were then sold to legacy industries,” he said.
An example of this he cites is Moody’s recent acquisition of 360kompany AG (better known as just kompany), a global business verification platform. The move is expected to bolster Moody’s “Know Your Customer” capabilities, providing it with even more insight into its customers, their individual risk profiles and financial positions.
But not everyone sees the same potential.
Paul Krugman, Nobel Prize-winning economist and New York Times columnist, has long been a vocal Bitcoin skeptic. Last year he pleaded in a NYT column that 12 years later, Bitcoin has failed to live up to the hype.
“By the time a technology becomes as old as cryptocurrency, we expect it to be part of the fabric of everyday life or to have been abandoned as a nonstarter,” Krugman wrote.
The crash makes a reset possible
Whatever happens next with this controversial and versatile asset, Ozair says this crash offers a chance to revert to original crypto purpose.
“He was supposed to help underserved communities,” she says. “So let’s get back to basics. Let’s think about how we can create technology that can help society that can really create real social impact this time around,” she added.
And she is not alone in this hope.
“To me, crypto is the final frontier of the American dream for people trying to find socio-economic mobility in a country where inflation exceeds the minimum wage,” says Jacob.
“People forget that crypto was born out of Occupy Wall Street-era distrust of banks and governments to manage our monetary supply appropriately, that is, without collusion.”
Jacob continues his faith in crypto despite having lost 80% of his net worth in crypto on several occasions.
“I’m making even more money with the down market in Web3 than I would if I was still working in Web2,” he added.
What to read next
World Bank President Just Warned White-Heated Inflation Could Last For Years be creative to find strong returns
“There is always a bull market somewhere”: the famous words of Jim Cramer suggest that you can make money no matter what. Here is 2 powerful tailwinds enjoy today
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.