2023 started with a renewed sense of positivity for many cryptocurrencies. After enduring a challenging year in 2022, most tokens have embarked on a path to recovery. However, it is important to note that prices remain significantly lower than the record highs witnessed during the 2021 bull run. And not much is going on with Bitcoin, leading many investors to voice concerns over the future of crypto. But is cryptocurrency dead?
Modern investors consider real estate, stocks, and cryptocurrencies when considering investment assets. And it's hard to be on the sideline and watch a relatively new asset category continue to make waves again and again. 2021 was astounding for crypto, but they did not perform very well in 2022. Similarly, 2023 has been a continuation of the trends and patterns observed in 2022.. Does that mean crypto glory days are over? And is crypto dead now?
A lot is going on in the crypto market; cryptocurrencies are down, non-fungible tokens (NFTs) are trading at much lower volumes, and people need answers to the future of crypto. This article explains why many people think crypto is dead, whether investing in crypto is a good idea right now, and if crypto can ever die. Let's dive in.
Is Investing in Cryptocurrency a Good Idea or Not?
2023 appears to hold more promise for most market segments compared to 2022, including the stock and crypto markets. The crypto market created a space for a new category of investors. Individuals who were skeptical about the stock market had the opportunity to invest in a different and whole new asset class. And the most important thing to know is everyone has a personal opinion about whether or not cryptocurrency is dead or if it has a good potential for future use and growth.
Here's what some iconic investors say about cryptocurrency.
- Warren Buffett
Warren Buffett is highly skeptical about Bitcoin and crypto. According to Buffett, crypto is not a worthy investment because it doesn't produce anything.
- Elon Musk
According to Elon, Bitcoin can potentially change how we use money. He remains a big crypto supporter, especially of Bitcoin and Dogecoin. Among Musk's missions is to put one dogecoin on the moon. For this multi-billionaire, the future of crypto is very much exciting.
- Bill Gates
According to Bill Gates, cryptocurrency is based on the greater fool theory. A theory suggests that asset prices rise when enough individuals are willing to pay more for the assets. Gates doesn't consider crypto a worthwhile investment and chooses not to invest in them.
- Mark Cuban
Mark Cuban is a veteran investor and largely known as an Ethereum maximalist in the crypto industry. In a tweet he made in May 2022, he highlighted the future of crypto. According to Cuban, cryptocurrencies without solid utility will fade away, and those with strong value and utility will thrive.
Terra suffered the biggest crash in 2022. But is terra dead crypto today? And can cryptocurrency die?
Can Cryptocurrency Die?
Bear markets are when prices of assets generally wobble and fall before consolidating at a bottom. And bull markets are periods of continual growth and rise in the value of assets. 2021 was a bull market for crypto, and 2022 started as a bear season for most crypto coins. 2023 has seen a combination of both runs. Despite a notable rebound since the beginning of the year, Bitcoin price continues to be more than 60% lower than its peak of $68,789 in November 2021.
These two markets are cyclical and expected. It is expected that crypto will move into a bull market after exiting the present bear market. But it is largely unknown when the bull market will begin. So, is the cryptocurrency market dead? No.
Because the crypto market is not thriving now doesn't mean crypto is dead. The technology behind crypto is the blockchain. And blockchain is used in every industry globally. Cryptocurrency cannot die but what could happen is it could be subject to governments trying to regulate and exert some level of control over it.
However, in the meantime, the crypto market will not crash and die out. There's space for investors to make worthy investments that will be valuable and rewarding in the future. That's why it's important to understand the pros and cons of investing in crypto before delving in.
Pros of Investing in Cryptocurrency
Before you decide if investing in crypto is right for you, examine the benefits of cryptocurrency and how it's changing the financial system. You can then make an informed decision that suits your style and works for you. Let's get into it.
Fast Return Due to Volatility
One of the reasons people ask; is crypto dead 2023 is because this year has been marked by high volatility in the crypto market. And much of that volatility has been more of sharp declines in crypto asset prices. Generally, it is believed that many investors would prefer not to experience volatility.
But the reality is that volatility is a major characteristic of the market. And if you understand how to leverage the ups and downs of a particular cryptocurrency like Bitcoin, you'll make very good profits. Investors can profit from the rise and fall in the price of Bitcoin by buying and selling BTC quickly. However, there's a caveat to it. You must have a good entry and exit price; otherwise, you could end up with big losses.
The only cryptocurrencies not subject to high volatility are stablecoins. Stablecoins are crypto derivatives of the U.S. dollar. These stablecoins have low volatility, which means there's little to no chance of making profits with them. Instead, they act as a store of value and can be used to hedge against inflation. Examples include the Tether (USDT), Binance USD (BUSD), and USD Coin (USDC).
Cryptocurrency Is Decentralized
The traditional banks are all governed by the central bank. The central bank is government owned and is subject to its authority. Individuals can lose tons of money because of directives from banks or the government. Delayed transactions can be a serious disadvantage during emergencies.
These and many more are some of the things plaguing the current financial system that crypto was created to solve. So, with all these challenges in the conventional banking system, is cryptocurrency dead? No, crypto is not dead, and blockchain solutions to combat the challenges of the present financial system are being built.
Cryptocurrency is decentralized, as no government has control over it. As a result, users are spared of foreign exchange and international transaction fees. Policies guiding the use of crypto are not provided by the central bank but are built around the blockchain powering a cryptocurrency. Crypto transactions can be done anywhere in the world in split seconds and at lower fees making it a top option for many users.
A Way to Diversify Your Assets
Portfolio diversification and management are important aspects of investing. Diversifying your investments will help you spread your risks more efficiently than if you have a single investment. Cryptocurrencies are a great way to diversify your portfolio. The government does not regulate them; they are less subject to inflation than stocks and bonds are and don't get affected by economic impact as much.
Although many crypto critics claim crypto does not influence the assets in the stock market in any way. However, MarketWatch analytics suggest that Bitcoin has a 0.03% correlation with the S&P 500 index. So, is cryptocurrency dead 2023?
There's a case for how crypto impacts trading assets like stocks and bonds. And to many, because Bitcoin has a low correlation with the stock market, it's gradually dying. Others believe that because the stock market is not impacted by tweets from influencers like Elon Musk, the way the crypto market is, crypto might not be a strong investment option. But recently, the crypto market has been gaining much consolidation and is not swinging up and down as much because of such events.
Cons of Investing in Cryptocurrency
Like any other investment, crypto has a few factors that might not make it the right option for you. Knowing the cons and pros of crypto as a potential investment will help you decide if it is right for you and what your investment strategy should be.
Difficulties with Cryptocurrency Exchange
Some crypto critics are fond of mocking crypto by saying crypto is dead long live crypto. While crypto isn't dead, there are some fee issues it has. One of them is the ease of exchanging cryptocurrency. When blockchain developers create a new crypto coin, the new coin is independent of the other existing ones. This creates a challenge in swapping one coin for another or one fiat currency for multiple coins.
However, solutions have been developed to combat this challenge. For example, if you register on a crypto exchange like Binance or Coinbase, you can connect your bank account to the platform. Use fiat money like U.S dollars to buy any cryptocurrency of your choice from the exchange. You can swap the crypto you bought for any other coin anytime. You can also use the peer-to-peer exchange to sell to other individuals.
And users who prefer to use Defi apps can swap their tokens with other tokens on the same blockchain using dexes like Uniswap. And if they need to get a token built on another blockchain, they can bridge from one blockchain to another using defi apps like Evobridge.
Lack of Regulation
Volatility can be an advantage and disadvantage for crypto investors. Investors trading crypto derivatives can profit from the sharp rise and fall in coin prices. In comparison, long-term investors could sit in a perpetual loss or gain for a long time. Like volatility is two-sided, so is the lack of regulation of cryptocurrencies.
The government's lack of regulation of cryptocurrencies makes crypto a riskier investment, but does that mean crypto is dead? No. While it's safer to invest in stocks because they represent an asset class that the government regulates, there are just as many opportunities for growing wealth in the crypto market.
Whichever investment you choose, ensure it's one you're confident of and convinced of its value and future potential.
Cyber crimes are common on the internet even before the advent of cryptocurrencies. So, it's not unexpected that an innovation that leverages the internet for its operations will face cyber security issues.
All crypto exchanges and individual crypto wallets are targets for cyber hacks. Hackers look to exploit vulnerabilities in the blockchain powering a cryptocurrency or the operational structure of a crypto exchange and even try to access the emails and phones of users to get their private keys.
These cyber hackers can launch an attack leading to users losing tons of their investments. These events occur more than usual in the crypto space, leading many to accept that crypto is dead commercial asset.
For example, in August 2022, a particular hacker managed to steal $570 thousand worth of crypto through an attack on the Curve Defi protocol. Although Binance recovered and froze over $450 thousand, about 83% of the total amount stolen, it still goes a long way to show how vulnerable the system can be.
Crypto Is Dead? Not At All!
Cryptocurrency is not dead, as some critics are proposing. Although the general market is not thriving like in 2021, investors can Invest in crypto hosting services to increase their chances of making more profits.
You can invest in cryptocurrencies, especially those with proven utility and value. In the long run, cryptocurrency is the global financial solution everyone needs and is bound to be a force in the Web 3 age.