The cryptocurrency market has been bleeding for some time now, and there is no end in sight. Over $600 billion has been wiped off the total market cap since its peak in January. So what’s causing this crypto crash? And more pressing, what can you do to protect your investments? Here are 5 things you need to know right now:
1. The Market Is Overvalued
This truth is perhaps the most obvious reason for the crash. When an asset class is as new and volatile as crypto, it’s very easy for prices to get ahead of themselves. And that’s exactly what happened. Prices soared to unsustainable levels, and now they’re correcting.
2. The Regulatory Environment Is Uncertain
Another big factor weighing on the market is regulatory uncertainty. Governments worldwide are still trying to figure out how to deal with crypto, which has created a lot of uncertainty. And when investors are uncertain, they tend to sell.
3. The ICO Market Is Drying Up
One of the big drivers of the crypto boom was the ICO market. Startups were raising millions of dollars in hours, and investors were eager to get in on the action. But the ICO market has cooled off considerably, taking some wind out of crypto’s sails.
4. There’s Too Much Hype
Crypto is often compared to the dot-com boom of the late 1990s. And there’s a lot of truth to that comparison. There was a significant hype back then, and investors were getting caught up in a frenzy. The same thing is happening with crypto now. Prices are being driven by speculation, and that’s never a good thing.
5. The Bottom Could Be In
Finally, it’s worth mentioning that the crypto crash could be a case of prices bottoming out. We’ve seen this transpire before and may be seeing it again now. So if you’re considering buying crypto, now might be a good time to do it. However, this isn’t financial advice, and you should always do your research before investing.
Protecting Your Investments
If you’re worried about the crypto crash, you can do a few things to protect your investments:
Diversify
Don’t invest your cash into one asset class. You could lose everything if you have all of your money invested in crypto, and it crashes. So it’s important to diversify your portfolio and invest in other asset classes.
Keep a Long-Term Perspective
It’s equally important to keep a long-term perspective. Cryptocurrencies are still a new and emerging asset class and will be very volatile in the short term. If you’re investing for the long run, volatility shouldn’t bother you too much.
Don’t Invest More Than You Can Afford to Lose
Finally, don’t invest more money than you’re willing to lose. Crypto is a risky investment, and there’s a chance you could lose everything you put in. So only invest what you’re comfortable losing.
These are just a few things to remember if you’re worried about the crypto crash. Again, this isn’t financial advice, and you should always do your research before investing. But if you’re looking to protect your investments, these tips should help.
This article is for information, illustrative and entertainment purposes only and does not purport to show actual results. It is not, and should not be regarded as investment advice or as a recommendation regarding any particular investment action.
