Crypto Market is Down – Bloodbath or Bargains?

Should we be concerned?  So far, 2022 has put the digital assets market squarely in ‘bloodbath’ territory, and investors are making for the hills once again.  What is it about the month of January that that brings out the absolute worst in cryptocurrency investors?  At least, that’s what the history of this youthful market has taught us.  However, we’ve seen the bottom fall out on earlier occasions, and, unlike the Dotcom bubble of 2000, cryptocurrencies have been able to pull off some rather remarkable ‘come backs’ in their history.

Cryptocurrencies are a rapidly evolving market, but it is still a nascent market - miles away from maturity.  Heck, it’s scarcely even regulated!  So long as digital assets, and the blockchain technologies behind them, continue innovating, finding their rightful place in the market, cryptocurrencies are going to remain a highly volatile environment.  What we’re seeing again this month is that trademark volatility.

Cryptocurrency or Dotcoms?

The distinction between cryptocurrencies and the dotcoms of the late nineties is that investors suddenly realized, mostly in March of 2000, that many of the online companies with a “.com” at the end of the web address had business models that simply weren’t viable, as well as wildly unprofitable.  In the case of cryptocurrencies, there is an evolution of new technologies taking place - financial innovations.  Digital currencies are designed with the intention of redefining how the world uses money.  How it evolves is a question yet to be answered, but for now, investors are still largely convinced that the difference between profitability and loss has more to do with timing than any other factors.  Every cryptocurrency investor should expect that, no matter what digital coin they invest in, it’s likely to encounter huge fluctuations in valuation.  Again, this is the kind of volatility we should expect from an immature market.

So how many of us a year from now will look back, and wish we’d only bought more cryptocurrency this month?

A new Global Finance

The momentum that seems to buoy cryptocurrencies every time the market tanks is the belief that cryptocurrencies genuinely represent the very early stages of a new version of global finance that operates on these new blockchain technologies.  Where’s my proof?  Look at the ATMs that are getting as much utilisation as a public phone booth nowadays.  Find me one member of the Gen Z demographic that’s visited a bank recently.  You may have difficulty finding a millennial that’s ever physically walked into a bank. In modern society, conducting financial transactions has become a predominantly online experience.  The pandemic of the last two years has only galvanised that trend.

Instead of walking up to an ATM or going into a branch, society handles their finances via tablets, smart phones, and laptops.

The advent of digital assets suggests that the most innovative concepts of finance are possibly yet to be revealed.  The blockchain technologies powering cryptocurrencies represent faster, more prudent means of exchanging currency and it is expected to transform global finance.  2021 was simply a watershed year for cryptocurrencies, despite them being banned by the Chinese government.  There’s still more excitement than there is trepidation in this market, and that means 2022 is shaping up to be another active year. 

In other words, the best is yet to come.