Cryptocurrency’s Fall: A Blip or a Warning?
2021 was very kind to cryptocurrencies. Cryptos like Bitcoin saw a rise of nearly 18% in the year, and with all the inflation the country and world had been seeing, investors and consumers began to look at cryptocurrency as a potential hedge against inflation, perhaps replacing the long-heralded inflation-proof commodities such as gold and silver. Yet 2022 has been less kind. With the new year still in its adolescence, there is much ambiguity as to what 2022 will bring, with issues like inflation still plaguing working families as well as a continued pandemic and international tensions rising in Eastern Europe.
How has 2022 started for cryptocurrency? About as bad as an elephant on a tightrope. Earlier this week, cryptocurrencies lost nearly $130 billion in value in 1 day. Every cryptocurrency from Bitcoin to Dogecoin to Shib coin have suffered major hits. Some cryptos have seen decreases of anywhere between 20-50% from their summer/fall highs. Seeing this sudden plunge of cryptocurrencies has investors wondering: is a bubble about to burst?
One important fact to remember through all this fog is that there is lots of uncertainty in every corner of the financial market. Some are claiming the recent downturn in the markets is a correction. Others have said it is merely a blip. Uncertainty affects everything, and it might be affecting cryptocurrencies too.
There is one concern for cryptocurrencies that could emerge in the near future: and it might come from the federal government. According to a recent report from Barron’s, Biden is considering using an executive action to task federal agencies in regulation of digital assets such as cryptocurrencies as a matter of “national security” (Barrons). What this “regulation” entails remains to be seen, but it could cause some issues for crypto investors depending on how harsh the federal government will regulate this market.
So where is crypto headed this year? That’s anybody’s guess. But the recent downturn doesn’t quite signify that the end of cryptocurrency is here. 2022 is going to bring lots of uncertainty, in both the stock market and the crypto market. It might be unwise to jump off the ship just yet.
