Cryptocurrency in the Event of a Market Meltdown

1. Get started Open in app Cryptocurrency in the Event of a Market Meltdown Follow Ajay Kapoor Sep 7 · 7 min read Cryptocurrency’s popularity has surged in recent years, and with good reason. Its decentralized nature makes it an attractive alternative to 몭at currency; its international reach means that businesses can engage with people all over the world; and of course, there’s the potential for big pro몭ts. As per TechJury, Bitcoin garnered a market capitalization of $1072.21 billion in

2. As per TechJury, Bitcoin garnered a market capitalization of $1072.21 billion in February 2021. Moreover, the market size of cryptocurrency is to reach $1087.7 million by 2026. However, cryptocurrency’s price is notoriously volatile, so what would happen if it faces global market turmoil? How would cryptocurrencies react if markets worldwide fell apart? Here are some of the ways cryptocurrency could face the downturns of a market meltdown: 1. Fiat Currency In몭uences To understand how cryptocurrency would react to a global market meltdown, you must 몭rst understand 몭at currency. Fiat money is backed by government regulation or law, which makes it di몭erent from commodity money, such as gold/silver coins. So if all countries decided at once that 몭at currency was no longer legal tender, what would happen? Well, in short, there could be massive volatility in cryptocurrencies if that were to happen. It may not cause them to fail altogether, though. How bad an economic situation is worldwide will determine whether people everywhere can switch over en masse onto crypto-currencies or not because many are still very much dependent on third-party banking systems. If a crisis occurs, it may take years before cryptocurrency can 몭nd its way into mass adoption, and by then, it might already be too late. Countries also di몭er vastly economically, with one su몭ering more than another depending on size and industry sectors that drive their economy. An economic crisis isn’t uniform across regions, and neither is its impact. A 몭nancial crash doesn’t instantly send every country’s economy spiraling downward toward collapse — though it’s certainly conceivable should things get desperate without enough help from other nation-states to bail out those su몭ering dire consequences. 2. Stock Market In몭uences

3. Cryptocurrencies are based on blockchains that use decentralized systems to verify transactions. As such, cryptocurrency is in몭uenced by public con몭dence; if consumers don’t feel con몭dent about an asset or think they will lose value, demand for it goes down, and prices go down with it. When examining cryptocurrencies, we need to look for factors like liquidity (how much can you sell at any given time?) and volume (how many people are buying?); these two factors in몭uence price because supply and demand constantly adjust to each other. Cryptocurrency markets are incredibly volatile right now, which means prices could go up or down at any moment — and there’s not much you can do about it. 3. Assets In몭uences Cryptocurrencies are known for having large price swings. Some cryptocurrencies have lost over 90% of their value since being added to exchanges. Famous examples include bitConnect (BCC), which gained immense popularity in no time and then failed miserably just after three months of its launch. Many fail to survive the market and su몭er a similar fate. The worldwide renowned cryptocurrency, Bitcoin, had faced a downfall as high as 68% in 2018. These 몭uctuations can be unnerving for potential investors, so it is crucial to understand how each asset in몭uences market conditions. Before you invest in any one asset, be sure to consider all available information about its risk factors. For example, several di몭erent tools can help you monitor price volatility by cryptocurrency or asset type. Knowing these in몭uencers will help you manage risk and better position your portfolio for future pro몭ts.

4. Many exchanges provide real-time updates on current pricing information across multiple asset classes, allowing investors to make informed decisions when choosing where to allocate their funds among coins or tokens available on an exchange platform. When approaching digital currency investment strategies, many newbie investors seek out aggressive investment strategies in hopes of maximizing pro몭t; however, research suggests that seeking out methods with low volatility may prove more pro몭table over time. Low-volatility strategies are often characterized by broad diversi몭cation across cryptocurrency types, meaning long positions are often balanced with short positions to minimize exposure during times of price decline. Many scenarios could potentially in몭uence cryptocurrency prices into decline; therefore, having balanced investments will allow you to respond quickly if market trends change unexpectedly. Low-volatility investment portfolios include equal investments across at least ten top cryptocurrencies. Low-volatility portfolios o몭er consistency throughout market cycles while providing higher expected returns than traditional stocks during bull markets without signi몭cantly increasing associated risks. 4. Technology In몭uences Cryptocurrencies are digital currencies that get coded through advanced encryption techniques. These techniques make cryptocurrencies potentially anonymous, decentralized, and secure. All users on that cryptocurrency’s network have to approve each transaction before being veri몭ed as legitimate. Cryptocurrencies have been heavily traded since their creation in 2009, with hundreds of di몭erent coins being created over time. However, there are around 5840 di몭erent cryptocurrencies currently available on various exchanges worldwide. Many crypto coins have unique features that appeal to users looking for speci몭c functionality.

5. Source: Statista It gets considered that these altcoins now represent an entire market cap of over 1000 billion dollars globally, with many expecting future growth to increase exponentially as more people start to trade them over 몭at currencies such as U.S. dollars or Euros. With every technological advance comes both opportunities and challenges to overcome. While global stock markets continue to grow at record rates, many are beginning to worry about what would happen if an economic crisis were to occur, what e몭ect it would have on cryptocurrency prices? Global stock markets did drop substantially during 2011 compared with how they did just prior. Still, for cryptocurrencies, they continued growing steadily throughout, then stabilizing once again later that year at around $3 per coin. It then begs the question, how would other traditional markets react while cryptocurrency prices continue to surge further upwards if another global 몭nancial crisis were to occur? How could you make money from using crypto coins? The answer isn’t simple because while some hold value today, others don’t appear promising at all. 5. Impact of Correlations Cryptocurrency could survive if it maintains its correlation to other markets or even becomes more correlated to them. That’s because while cryptocurrency isn’t attached

6. to any central bank or government, it does rise and fall based on demand — so there is still some link between it and 몭at currency. Suppose it hits a global meltdown like what we saw in 2008. In that case, investors may turn away from stocks & other holdings toward cryptocurrencies as an alternative, at least until they see their crypto investments are falling too and so on down a slippery slope. But either way, being less reliant on traditional 몭nancial institutions will likely bene몭t cryptocurrency in most crises. The world might not need another Lehman Brothers event. According to a 90-day correlation matrix developed by the analytics team of Sifr, bitcoin’s correlation with the S&P 500 index of the United States equities is at minus- 0.14. It’s a statistically neutral position since 1 is a symbol of a perfect positive correlation. On the other hand, -1 is a perfectly negative relationship. The correlation between the top cryptocurrencies — including ethereum, litecoin, and ripple — and equities was slightly more robust, sitting at minus-0.20 for most of the period, but noticeable 몭uctuations are visible. Note: Sifr provides risk monitoring services for 몭nancial institutions around central clearing and settlement for cash securities globally. Wrapping Up Any 몭xed central authority does not regulate cryptocurrencies. It is both their biggest strength and biggest weakness. No centralized management controls cryptocurrency prices or sets binding policies for exchanges, which means that wild price swings can happen. Cryptocurrencies are ideal for people who want to be their bank because you don’t have to answer any third party about your money. On the other hand, without regulatory oversight, there is potential for market manipulation. With no regulations or central authority setting prices, cryptocurrency markets are incredibly volatile and make it easy for unscrupulous actions to manipulate them.

7. incredibly volatile and make it easy for unscrupulous actions to manipulate them. The Mt Gox scandal remains one of crypto’s most signi몭cant failings as an industry because millions were lost due to hacking and fraudulence on the part of exchange owners and employees. Connect with acryptocurrency development company in Indiafor the a몭ordable development of crypto coins. Join Coinmonks Telegram Channel and learn about crypto trading and investing Also, Read Best crypto exchange | Top 10 cryptocurrency exchanges in 2021 Crypto trading on the cryptocurrency exchanges requires knowledge about the market, which can help you gain profit… blog.coincodecap.com 9 Best Crypto Lending Platforms in 2021 When it comes to cryptocurrency lending, tons of factors equate to a good earning profile. Also, the borrowing part of… blog.coincodecap.com Best Crypto Trading Bots (FREE and Paid) in 2021 Best crypto trading bots for Binance, Coinbase, Kucoin, and other crypto exchanges in 2021. Quadency, Bitsgap… medium.com Best 4 Crypto Trading Signals Telegram Channels

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10. 10 WRITTEN BY Ajay Kapoor Follow Hey, I’m Ajay, a tech blogger working with PixelCrayons who loves to share his extensive tech-related knowledge with like-minded people. Coinmonks Follow Coinmonks is a non-profit Crypto educational publication. Follow us on Twitter @coinmonks Our other project — https://coincodecap.com About Write Help Legal Get the Medium app