As an emerging market and research direction, cryptocurrency trading have seen considerable progress and a notable upturn in interest and activity by several people. Crypto currencies, having experienced broad market acceptance and fast development despite their recent conception – yet, despite setbacks, blockchain technology persists, evolving beyond finance into diverse applications. Cryptocurrency was conceived or introduced in 2008 with Bitcoin, offering decentralized transactions and anonymity. Initial enthusiast (particularly by the influenced youth) led to market hype and speculative bubbles, introducing new applications to traditional finance and market.

Naturally, due to its conceived notions (like, “Is crypto curreny crashing?” and “Why is crypto currency down?”), so it is important to ask ourselves – Is crypto currency truly crashing down? Let us take a small glimpse at the historical aspect of crypto curreny and some of its major setbacks throughout the years.

 

Notable Financial Risks and Gains – Is Crypto falling up or down in the future?

One argument for pursuing Crypto currencies (despite the fact that investing in crypto currencies involves significant financial risks such as price volatility – leading to rapid, successive and substantial losses or gains, regulatory uncertainty, as governmentsdevelop policies which may affect market stability, accessibility and ease of use. Security risks include hacking, stealing and fraud, which may potentially result in the loss of funds. Further, Market liquidity can vary widely, impacting the ability to buy or sell assets without affecting prices.

Keeping in mind, an important argument in the support of investment in crypto currency is that smart contracts in various fields can help with securing the quality-of-service and even help with the ‘cost-efficient scheduling of medical-data processing’, which seems of crucial importance for the medical systems in the UK – after the Covid shock to the National Health Service (NHS).

In summary, pursuing crypto currencies as a solution to financial risk is supported by the potential to improve economic development indicators, such as bank lending and equity market development, while simultaneously addressing crucial challenges in the healthcare sector. Further, crypto currencies offer opportunities for enhancing the quality-of-service and cost-efficiency of medical data processing, which is of utmost importance for the UK’s healthcare systems in the aftermath of Covid-19 pandemic. Brief History of Crypto currencies (crypto) are digital assets or more precisely, a set of digital currencies that emerged with the release of Bitcoin in 2009.

Is crypto falling up or down in the future?

Crypto currency, being decentralized (meaning that there isn’t a centralized organization controlling the block chain) and collecting profits and an encrypted unit of exchange, is designed to be an alternative to traditional banks and payment systems in the modern day world of finance. Many investors see them as an opportunity to build wealth and grow from that point henceforth and also, to make peer-to-peer transactions outside of existing financial rail systems.

Unlike fiat currencies like the U.S. dollar, many crypto currencies are not controlled by a centralized authority. Instead of crypto currency transactions of popular coins (BTC, ETH) are publicly visible on a decentralized ledger known as a ‘block chain’.

Further, predicting the future direction of crypto currencies is challenging due to it’s volatile and sudden nature and the multitude of factors influencing their value. However, (as several trends and developments suggest) we can use the laws of “supply” and “demand” to better understand how the price of crypto currency will change in the future. Naturally, if demand is higher and grows faster than supply, then the value of crypto currency is bound to rise.

Demand-

The higher the demand for a crypto currency, the higher its price will be. For example, a crypto currency could unveil a new utility that draws new users into the platform, with both varied and shared interests, knowledge and experience — which in turn leads to the value of the crypto currency going up in the market.

 

SUPPLY-

The more units of a crypto currency there are, the less valuable each individual unit is. For example, if a large amount of crypto currency becomes available to the public, it’s likely that the price of that crypto currency will drop.

While risks such as regulatory crackdowns, market volatility, and technological challenges remain, Several trends and developments point towards significant growth in the price of bit coin (and thus, crypto currency). Some of these are Increasing institutional adoption (In recent years, more institutions and traditional finance entities are exploring or integrating modern day crypto currencies and block chain technology into their operations, which could drive rising demand from influential investors), Several technological advancements (Improvements in blockchain that are on-going and on the verge of completion, especially in technology, such as scalability solutions and enhanced security measures, may attract more users and investors),

Global economic uncertainty (Crypto currencies, particularly The Bitcoin, have been viewed by some as a hedge against inflation and economic instability, which could increase their appeal during uncertain times), Liquidity (A crypto currency’s liquidity refers to the efficiency or ease with which a token can be converted into cash without affecting its market price.

Liquidity can often have a hand in having a big impact on how your crypto currency is valued. For example, the more liquid a crypto currency is, the easier it is to be able to sell the coin at its current market price. Say, if a crypto currency has low liquidity, you may not be able to sell all or a portion of your tokens without moving the market price of the coin lower, as there may not be enough demand to absorb/buy the tokens.

Demand and supply are two key principles in understanding the overall concept of – “What sells the Bit coin?” Typically, It is the demand for crypto currency in the market. What classifies as demand? Demand for crypto currencies is determined by general market sentiment, that is— the overall attitude of investors towards crypto currency (at given time and market trends). Normally, a rise in market sentiment could lead to a rise in prices.

For example, Bit coin hit a peak cyclical high on April 14, 2021, which is the the same day that Coinbase became a publicly-traded stock. The Coinbase IPO was perceived as a big step forward for the crypto currency industry — which meant investors felt more comfortable investing in Bitcoin and other digital assets.

 

Therefore, while the potential for crypto currencies to rise in market value exists (keeping the above progresses and development in mind), it is essential for investors to consider these factors and stay informed about developments that could impact the Global Bitcoin market and employ suitable strategies to gain significant gains.

While the above mentioned factors aid towards the probability of the rise in value of the Bitcoin (and thus, Crypto Currency in the market), there are several cases of failure of executing profits from the crypto coin. While it is impossible to tell for certain as to whether The Bitcoin will lose or gain it’s value in the future, it does one good to note the factors that lead to the failure of crypto currencies. As mentioned earlier, when demand overpowers supply in the crypto currency market, there is gradual rise in the value of crypto currency.

But when the opposite case happens, that is, when supply outpaces demand, crypto currencies, naturally lose significant value. A few reasons why crypto currency may lose value include competitive pressures, high inflation rates, negative market news, hacks or rug pulls, regulatory actions, technological issues, market manipulation and sentiment and many more. For example, XRP (which was once one of the biggest coins in the crypto currency ecosystem earlier), has since lost value with time. Likely causes that highlight XRP’s decline can be attributed to multiple factors — such as the SEC’s lawsuit against XRP’s parent company Ripple, bad tokenomics (‘tokenomics’ refers to the crypto currency project’s monetary policy, or, in other words, how the project ‘manages’ supply and demand and a lack of development on the blockchain). It is noteworthy that, according to CoinGecko, more than 50% of crypto currencies have failed. Moreover, it is difficult for beginners from scratch in the field of crypto currency and investing to attract a suitable supply and demand goal, development ground and user base.

 

Historical aspect of cryptocurrency-

The first whitepaper on Bitcoin emerged at the peak of the financial crisis in 2008 (when it was first conceived) and it promoted the idea of a different economic system that is basically not dependent on a trusted third party. This briefly preceded 2009, when the main concern was the legality of such currencies and projects. To point out some of it’s legal mishaps, Bitcoin was considered a mechanism for criminals and drug dealers to bypass the legal banking system. Further, between 2020 and 2022, investment in cryptocurrencies (or, crypto) increased in multifold. The cryptocurrency market experienced significant volatility, uncertainty regarding the future and significant declines following the 2017-2018 boom.

Factors contributing to its fall included regulatory crackdowns, security breaches in exchanges, investor skepticism, environmental factors, etc. A lack of crypto currency regulation, coupled with their rapid growth and adoption, has led to numerous scandals and controversies, ranging from security breaches and hacks to fraudulent schemes and market manipulations. These events have increased the interest of the finance researchers, who seek to understand the underlying factors that contribute to such incidents and their implications for financial markets.Despite the collapse of Terra Luna, the FTX exchange in 2022, and the overall downturn in the market for crypto, crypto investments have continued – against most odds.

 

Is there a possibility for bitcoin to recover from its recent crash, considering its current value of around $4k?

It is highly likely, given recent improvements and development ( though it is impossible to quantify for sure whether or not the value Bitcoin will rise or drop when it fluctuates), that there is a possibility for Bicoin to recover from its recent crash, considering it’s recent value is around $4K. Bitcoin has always ( historically) demonstrated resilience and the ability to recover from significant price declines.

For example, on 1st Nov 2017,CEO of CME Group, (the largest options exchange in the world), announced to launch a bit coin futures exchange by the end of 2017, and thus increased probability of the US Securities and Exchange Commission (SEC) approving a bit coin ETF by mid-2018. Shortly after this announcement, bit coins showed drastic growth and touched the 7600$. In INR it touched from 4.26lakhs to 5.03 lakhs in a single day. But later, it’s market crashed for some reason that is unknown and around 5PM that very day, bit coin dipped down to 4. 24lakhs.

Later on, slowly and gradually, it recovered slightly. But ever since that mishap, bit coin is recovering, and the value of bit coin took 4 more days(nearly by 5th Nov 2017) to reach 5.05 lakhs.

It can be noted that Bit coin might touch 8-10k $ by the end of 2017 alone, while awaiting further advancements and development. However, predicting market movements in the short term, especially during volatile periods, is challenging – it is more favourable to predict on the basis of the next decade or so, keeping in mind the lows and highs of the previous 10-15 years in the history of crypto currency. Interested investors should consider their risk tolerance and conduct thorough research before making decisions in the crypto currency market.

Bitcoin’s latest value in the global market was significantly higher than $4,000 (before it significantly crashed). However, since Bit coin has had to experience a significant crash bringing its value down to $4,000 or near that level, and recovering from such a scenario would depend on several factors such as it’s fundamental strengths, being the fact that Bitcoin’s underlying technology, advancement and its value proposition as a decentralized digital currency could attract long-term investors even after a crash, Markets trends, sentiments, Economic conditions and regulatory developments could help to elevate crypto currency from its state of crash.

 

Will crypto currency crash in the future?

While crypto currencies have gained popularity and acceptance over the years, their future stability and growth depend (and there is always a chance of crypto currency crashing in the market) on how these and other factors that affect it, evolve. Investors should approach the crypto currency market with caution, understanding and bearing the potential for both significant gains and losses in mind.

Bitcoin, the most common and widely used crypto currency today, is most likely to remain popular with speculators over the next decade (keeping in mind it’s historical growth and redundancy only, as it’s impossible to know for certain as to whether or not crypto currencies will evolve for better. Issues regarding decentralization (crypto currency was designed to be decentralized, so the users may have a direct hand at manipulating it without having to involve untrustworthy third parties), scalability, and security are the factors holding Bit coin back from more widespread adoption.

To understand more about why is crypto crashing and will it recover, these concerns must be addressed for the crypto currency to gain traction as more than a speculative investment. Bit coin developers are working seriously to find out the solutions, but for the most of the part, they have been unsuccessful. Even in 2024, the majority of Bitcoins are still out in the world. But, these large entities will likely keep growing their holdings over time—and if they continue to be treated as a speculative investment and store of value. Bit coin (the crypto currency) is thus likely to become more centralized as its future supply dwindles.

Naturally, as it is next to impossible to predict future crashes in crypto currency and stock market, but some potential risks and uncertainties and factors that could contribute to a market crash in the years to come include- Regulatory changes or increased government scrutiny, Security concerns or high-profile hacks (theft and impersonation), Market manipulation or liquidity issues (one such case is The “Covid Black Swan” event on 8th to 12th March 2020. All Assets, stocks etc. took a nose dive and eventually, a downfall, because people needed cash. This is always a risk for assets, when there’s any kind of liquidity crisis. Other factors include Overvaluation or bubble-like behaviour, technical mishaps, etc.

 

Bottom line-

It may be noted that even the top all coins like Terra can suffer overnight losses and struggle to survive in the crypto and stock market in the long run. The idea behind a decentralized algorithmic stable coin like Terra USD sounds interesting, but it needs a better strategy to survive in the crypto currency market.

The centralized stablecoins like Terra (USDT), which are often criticized for insufficient cash reserves, look helpless and least problematic in times ofcrisis. Bitcoins and the crypto market is rising beyond expectation after a while, the only question is when are we going to experience the rise?

 

Conclusion of why is crypto crashing and will it recover?

The future of crypto currencies undoubtedly hinges and heavily relies on several critical factors such as technological advancements to improve scalability and security, regulatory clarity to enhance market confidence, Government regulatory checks, broader adoption across industries and among institutional investors. The crypto market is naturally subject to rapid price fluctuations driven by market sentiment, trends, manipulation and external factors. Investors must carefully assess their risk tolerance and conduct thorough research before participating in this dynamic market. Other factors listed above may also apply.

While the crypto market’s speculative and uncertain nature is bound to be risky, crypto currencies continue to evolve, offering potential benefits and gains such as faster transactions, lower fees, and increased financial inclusion to the investors.

Looking into the future and to know that why is crypto crashing and will it recover, crypto currencies hold promise for innovation and financial inclusion, redundancy and the tendency to bounce back effectively even after potential loss as a result of market fluctuations. Their long-term success hinges on addressing technological challenges that professionals are struggling to address today, regulatory clarity, and maintaining investor confidence amidst evolving global financial economy and landscape, shaping the future of potential investors and stakeholders for years to come.

Yours True Friend & Finance Advisor
Harry Bhagria