After falling sharply last year, the cryptocurrency market has become a roulette wheel for many investors. This kind of uncertainty has made the number of people willing to return to digital assets minimal. Potential buyers treat it as a type of investment with a lot of potential, but extremely dangerous to manage.
Investments within this market have taken a completely different turn from how they were handled. A few years ago, they were mainly based on buying cryptocurrencies to take advantage of their rising value. Today, a cryptocurrency automatic trading strategy is favoured, where through Cryptobots small profits are obtained from many transactions in the face of small daily volatility peaks.
However, although the market has been stable since January with few sharp declines, the outlook is about to change. With the arrival of summer, sharp drops have made us think: Is it still worth investing in cryptocurrencies?
In this article, we’ll study how the current cryptocurrency value works and how we can continue working in this market in an efficient way.
Bitcoin: The currency that dominates all others on the market
Since the emergence of cryptoassets, investors have learned that the market is usually ruled by the cryptocurrency that started it all: Bitcoin. This has intertwined the value of all cryptocurrencies, so any sharp drop in its appreciation generates a generalised crash.
This also has advantages, as it can work in reverse. Any cryptocurrency that has managed to cement itself as reliable in the market (Ethereum, LiteCoin, Cardano, Dogecoin, etc.) gains downside resistance because of the stability of the cryptocurrency. In turn, if the Bitcoin price rises, usually so do these coins.
However, this union of cryptocurrencies and their value means that they all acquire similar market characteristics. Like Bitcoin, all coins are high-risk, volatile assets with a value that varies greatly.
These characteristics are extremely attractive for making profits in periods of unstable economics where other assets lose value. However, when fiat currencies and other assets begin to take steps to sustain themselves, it’s cryptocurrencies that suffer.
What’s preventing cryptocurrencies from gaining momentum again?
The world is in economic recovery after two previous years of depreciation. Many countries have initiated processes to cement the value of their currency and even unusual moves to avoid devaluation. A clear example is the interest rate change at the U.S. Federal Reserve that shook the world economy.
With most currencies looking to recover (especially the dollar), cryptocurrencies are beginning to lose their attractiveness as a source of investment, and their value is plummeting. On top of that, the world has been in a so-called “war economy” for a couple of years now.
This type of economy is based on the prevention and collection of investments to avoid losses, moving capital to more stable assets, such as gold. The conflicts that have arisen globally at this time have entrenched this for many nations that previously invested heavily in cryptocurrencies.
Finally, countries, such as China, have made strong moves to prevent the use of cryptocurrencies in order to stabilise their economies. As a result, the amount of people handling the asset decreases in the market, worsening an already bad situation.
With so many negative aspects to the market, investors are scarce and quite careful. It’s difficult to find giant movements of Bitcoin (or other currencies) like the ones we used to see some years ago, which raised the price by thousands of dollars from one day to the next.
Does this mean that cryptocurrencies are no longer viable as an investment?
Although this is a generalised idea, nothing could be further from the truth. The problem lies in the approach that’s being taken and how investments are being made.
When the rise of cryptocurrencies began, many individuals made large investments and saw the value of their cryptocurrencies grow daily. This type of investment is common when working with stable assets with an upward trend (as was the case at the time with Bitcoin and other currencies).
However, today the market is constantly wobbling. There are long periods of stability with a tendency to rise, and then we can see dizzying drops in a matter of hours. This means that the investment mode must change to one of gradual exchange.
Trading is a perfect way to invest in crypto, earning small profits from multiple daily transactions. In fact, many sites have started offering bots, or artificial intelligence specialising in this type of investment, obtaining very favourable results.
The truth is that in order to survive in this world, it’s necessary to study constantly and not be reluctant to change. If we keep abreast of how the world of cryptocurrencies is changing, it will always be possible to obtain very good profits from this type of investment.