Bitcoin price crash has left 40% of investments under water

Tuesday, May 10, 2022
author picture Gerald Girard
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Original content created by news.limited staff

The Bitcoin price crash Has Left 40% of Investments Under Water

According to recent research‚ nearly half of bitcoin holders are underwater on their investments‚ or about $69‚000‚ compared to a peak of over $69‚000 in November. This figure rises if one accounts for short-term holders. Bitcoin's close correlation to Nasdaq's technology stocks also challenges the argument that it serves as an inflation hedge. The article argues that investors should instead set up traditional long-term investment accounts.

Long-term holders would suffer small losses relative

Despite the resurgence of the cryptocurrency‚ long-term holders are unlikely to face large losses if the price crashes. This would be in contrast to smaller investors‚ who would be more likely to react to the fluctuations in the market. Financial advisors suggest that long-term investors should not invest a large portion of their portfolios in crypto‚ as they can interfere with other financial priorities. According to Humphrey Yang‚ CFP at Modern Money Management‚ long-term holders would suffer small losses in relation to the Bitcoin price crash. The recent volatility in Bitcoin's price has been triggered by short-term investors‚ who were trying to make a quick profit or cut losses before the market crash. This profit-taking behavior was the cause of the panic among small investors and may be one of the contributing factors to the price crash. Both Antoni Trenchev‚ the managing partner at Nexo‚ and Kain Warick‚ the founder and CEO of Synthetix‚ believe this is a common phenomenon.

Institutional investors would suffer large losses

A crypto currency price crash would wipe out a substantial amount of wealth‚ destroying a majority of institutional investors' money. While long-term holders would suffer small losses‚ they would lose huge unrealised gains. The largest losses would be suffered by those who bought less than a year ago. Most institutional investors have exposure to crypto‚ such as hedge funds‚ university endowments‚ mutual funds‚ and some companies. A rout in the cryptocurrency market can be triggered by internal or external shocks. Serious hacks could cause the market to crash‚ as could clampdowns by regulators or central banks halting the rally. While a crash in the price of bitcoin may be rare‚ it is still possible. The risk remains high‚ and investors must remain vigilant. Institutional investors should not wait for a Bitcoin price crash to occur to protect themselves. A crash in the price of Bitcoin would cause systemic risk‚ with huge losses for institutional investors. A crypto crash could affect traditional financial systems as many of the intermediaries are offshore. A collapse in the price of Bitcoin would cause financial chaos throughout the entire industry‚ and the Fed may end support sooner than expected. Institutional investors should invest in crypto only if they can stay long-term‚ and not speculate on a volatile market. Despite the potential risks of investing in cryptocurrency‚ the vast majority of institutional investors have made the decision to participate in the crypto craze. They are already investing in the crypto market‚ and they are increasing their exposure with each passing month. It has also become an increasingly lucrative investment for many. In addition to these institutional investors‚ at-home traders have become exposed to the bitcoin market‚ and they are now using money they earned in the previous years to invest in Bitcoin.

Cryptocurrencies are speculative

While many people are convinced that cryptocurrencies are the future of money‚ they are not reliable‚ according to Federal Reserve Chairman Jerome Powell. In fact‚ the Fed is moving slowly to create a digital dollar. He made the remarks in a panel discussion on digital banking‚ hosted by the Bank for International Settlements. Bitcoin has attracted big-name investors and has some acceptance in the financial world. The Federal Reserve has been working for several years on a digital payments system. Its final product is expected to be launched in about two years. The Bank for International Settlements‚ a group of central banks‚ has called for more regulation of the cryptocurrency market. In a report published on its website‚ the Bank said cryptocurrencies are speculative assets‚ facilitate criminal activity‚ have few redeemable public-interest attributes‚ and have an environmentally harmful footprint. Despite the aforementioned concerns‚ cryptocurrencies are far from dead. The Bank for International Settlements has called for more coordinated global regulation of the digital money market. Despite the fact that many cryptocurrencies are largely unregulated‚ the Securities and Exchange Commission has expressed concern about their volatility. The commission has rejected several applications for exchange-traded funds (ETFs) that invest in Bitcoin and other cryptocurrencies. Despite the concern over regulatory oversight‚ the current chair of the SEC has said that he has no intention of outlawing cryptocurrency. However‚ the SEC has repeatedly rejected Bitcoin ETF applications. Because cryptocurrency has no centralized authority or regulatory structure‚ the value of the digital currency is highly volatile. There are countless fraudulent projects claiming to have the ability to generate billions of dollars and scam the unwary public. As a result‚ the U.S. federal government has increased its scrutiny of crypto. The Securities and Exchange Commission has launched consumer resources and imposed massive fines on companies that do not register with the government. However‚ the growth of these digital currencies has fueled the capital and business growth of multiple sectors. Although it is highly speculative‚ it has fueled significant capital growth across multiple sectors. And despite its volatility‚ the cryptocurrency industry is not dead‚ and it is likely to continue growing in the coming years. And although Bitcoin and other cryptocurrencies have experienced volatility‚ these currencies have been the fastest-growing assets in the past decade.

Investors should set up a traditional long-term investment account

If you're an investor who's thinking about retirement‚ setting up a traditional long-term investment account may be a good idea. Long-term investment accounts are best for those who have a long-term plan and don't want to rush into making investments. This strategy can help you avoid the high cost of taxes‚ as well as the risk of underperforming your goals. While this style of investing may not be suitable for everyone‚ it can be a great way to ensure that you have sufficient savings for retirement. Long-term investments tend to earn higher returns than short-term ones. This is because you have time to recover after a loss. Unlike short-term investments‚ you can choose high-risk investments such as real estate and stocks‚ and you won't need access to your money right away. You can also set up a retirement account or invest in a diversified portfolio. While traditional long-term investment accounts may not earn as much as shorter-term investments‚ they have more flexibility and are generally safer for most investors.