The course of the cryptocurrency market in 2022 has scared away individual investors.
The latter had flooded the sector a year earlier in the midst of the crypto craze in hopes of making a quick buck.
But the fall in prices of most cryptocurrencies and numerous scandals have destroyed all these dreams.
The crypto market has lost over $2.1 trillion from its all-time high of over $3 trillion reached in November 2021. This decline means investors have seen the value of their portfolios melt away. For some individual investors, almost all of their savings have evaporated.
Bitcoin (BTC), the world’s leading cryptocurrency by market value, has fallen from an all-time high of $69,044.77 reached on November 10, 2021 to $16,746.62 currently, according to the data firm. CoinGecko. When many individual investors joined the crypto craze at the end of 2021, BTC evangelists predicted that the cryptocurrency was on course to reach $100,000 before the end of 2021.
FOMO
Lured by these tantalizing predictions, many retail investors gave in to FOMO, which stands for Fear of Missing Out. FOMO is a crypto acronym generally used for anxiety about missing out on making money.
While the market crash chilled amateur investors, BTC and crypto evangelists did not lose faith even as they got their fingers burned. This is the case of billionaire venture capitalist Tim Draper. He predicted that bitcoin would hit $250,000 by the end of 2022.
He just reiterated that prediction for 2023 in an email to CNBC. Given the current price of bitcoin, this means the digital currency will skyrocket by 1,400%.
“My hypothesis is that since women control 80% of retail spending and only 1 in 7 bitcoin wallets are currently held by women, the dam is about to burst,” Draper told the outlet.
Draper thinks there are positive factors to restart the cryptocurrency boom.
“I suspect the halving in 2024 will have a positive run,” Draper founder Fisher Jurvetson told CNBC.
The halving is an essential phenomenon of the Bitcoin protocol which takes place approximately every four years. It consists of halving the reward given to bitcoin miners who register new blocks on the block chain.
The Bitcoin protocol has a number of rules written into its code that cannot be violated. The first of these is the limitation of the number of bitcoins: there will never be more than 21 million bitcoins in circulation. It is this notion of scarcity that makes the value of bitcoin.
Originally, the Bitcoin network’s initial block reward was 50 BTC. But a special clause in the protocol, another impassable rule, reduces this reward over the years: this is the halving.
Uncertainty
Every 210,000 blocks, the miners reward for maintaining the Bitcoin network is thus rewarded. The halving therefore has a double objective: it limits the quantity of new bitcoins in circulation on the network and makes it possible to perpetuate the durability of the blockchain.
As a new block is created approximately every ten minutes on average, the halving generally corresponds to a duration of four years. There is nothing to do for the halving to occur, since it is written in the source code of the crypto-asset: the rewards are automatically halved when it occurs.
The big problem with Draper’s prediction is that there is currently a lot of uncertainty surrounding the cryptocurrency industry. We still do not know all the collateral victims of the bankruptcy of the empire of Sam Bankman-Fried, the disgraced former king of crypto.
Bankman-Fried’s crypto empire imploded within days on November 11. 11 after being at the center of the crypto industry. This empire consisted of cryptocurrency exchange FTX and its sister company Alameda Research, a hedge fund which also served as a trading platform for institutional investors.
Regulators are trying to piece together what happened, and more importantly how FTX, which was valued at $32 billion in February, was able to implode overnight.
0 Comments