Crypto

Cryptocurrency price in free fall! Why should we put it in perspective?

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A quick look at the prices of cryptocurrencies is enough! The cryptocurrency table is almost monochromatic, the color red has dominated for a few days or even weeks. Eager to see how much your cryptocurrencies have lost in value? Are you one of the disappointed people waiting for a snowy Christmas on the peaks of cryptocurrencies? Regardless of what the crypto market has in store for us by the end of the year, find out why cryptocurrencies are more than just a price chart.

Source: Adobe / Rudzhan

Cryptocurrency volatility: a problem?

In general, the adjective attached to the notion of “crypto price” is “volatile”. If there are indeed cryptos on the topic of chickens (Chicken Zilla, Chickenkebab Finance, etc.), we are talking volatility here! Often blamed and seen as the biggest problem in cryptocurrencies, volatility gets a bad rap! But is this really a problem? It all depends on your investor profile!

Yes, if you enter crypto just to win big and fast …

Source: Adobe / deagreez

One of the reasons that has driven the rise of cryptocurrencies since 2020 is their ability to generate large and quick profits due to their … volatility! Therefore, among crypto users there is a category of investors who are only interested in quick profits. We are not talking about traders here, in other words, professionals capable of managing specific tools like CFDs to win even in the bear market.

However, if cryptocurrency price volatility allows for quick gains, it is equally likely to cause sudden and significant losses. Also, the last few weeks have been trying for this type of investor and it is time to frown. Without wanting to stick the knife in the wound, below you will find the current price of the most declining cryptocurrencies currently.

Price variation in the last 24 hours Price variation in the last 7 days Solana (SOL) – 4.2% – 24.3% Ripple (XRP) – 6.5% – 13.0% Bitcoin (BTC) 0% – 13.8% Uniswap (UNI ) – 6.0% – 26.2% Algorand (ALGO) – 4.9% – 17.4%

No, if you consider the crypto ecosystem as a whole

Source: Adobe / deagreez

Fortunately, cryptocurrencies are more than just their role as a “millionaire maker.” To think that would be to completely lose the crypto ecosystem and the revolution that started behind it. If we were to dare to make a comparison, it would be similar to watching a classical music concert without turning on the sound and only observing the conductor!

Crypto has brought blockchain technology to the fore, which is already used in many sectors. Furthermore, the CEO of Goldman Sachs recently praised the merits of the blockchain. For him, the blockchain was more important than Bitcoin.

By putting cryptocurrencies in perspective as a tool within a fledgling ecosystem, price drops are not a problem. The important thing to consider is that the technology that supports cryptocurrencies is part of the (famous) “sense of history.”

Although there are still two years left, we could not predict the future of the sector, now blockchain and cryptos are fundamental. Even an institutional actor like Bank Of America recently said that Bitcoin and cryptocurrencies are “too important to ignore.” This recognition in itself is well worth some depravity from the courts!

Another more prosaic aspect to consider is that cryptocurrency prices need to be analyzed over time. Considering that the crypto market operates 24/7, it is mechanically more volatile than the stock market, for example. Beyond following the prices of cryptocurrencies in real time and being alarmed at the negative percentages, the important thing is to smooth the curves over a long period.

For example, if we take the prices of the cryptocurrencies mentioned above and detail their performance since the beginning of 2021, the perspective changes completely:

Price variation since January 1, 2021 Solana (SOL) + 9,798% Ripple (XRP) + 263% Bitcoin (BTC) + 69% Uniswap (UNI) + 243% Algorand (ALGO) + 299%

Therefore, we see that on a longer time scale, the variations turn positive and would make any bank book blush. In this example, only five cryptocurrencies were considered, but a similar demonstration would be valid in a large number of other cryptocurrencies.

Source: Adobe / artrachen

Volatility that decreases as cryptocurrencies grow

All of this does not change the fact that in the moment, it is never pleasant to see your assets lose their value. But cryptocurrency price volatility is not inevitable. Cryptocurrency price drops, while recurring and steep, are part of the normal process when new technology is in its infancy.

When you look closely, a single drop of water generates significant ripples in a glass of water. Yet this very drop poured into an ocean … it will not make waves! Therefore, the idea, often adopted by specialists, is that as the crypto is structured, its volatility will decrease. A growing crypto increases its capitalization. Hence, the “big traders” become less influential on the price of crypto. Also, the crypto itself is less sensitive to news.

The cryptocurrency market is bearish. It is true that, for the moment, the year does not end on a cannonball as many analysts expected. But far from a crypto defeat or failure, market dips are anecdotal in a sector that is becoming more and more structured and inescapable in 2022.

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