- Cecile Barria
- BBC News World
The cryptocurrency market crashed as the price of bitcoin fell 67% from its all-time high in November last year.
On Wall Street, they’ve dumped riskier investments, like cryptocurrencies, at a time when the shadow of a possible recession in the United States has moved large amounts of capital into more stable assets.
With creeping inflation sweeping the world, soaring interest rates and a global economic downturn which was fueled by the war in Ukraine, the market is going through a so-called “crypto winter”, i.e. an extended period of low prices for digital currencies.
To add fuel to the fire, plans to regulate the sector are being debated in the United States – which affects expectations on the price of crypto-currencies – as they appear more and more often fraud and non-transparent cases who went bankrupt.
One of the cases that caused the greatest impact in recent months was the collapse of the digital currency Luna which left hundreds of people on the streets who bet their money in search of great profitability, and in the end they watched helplessly how faded before his eyes.
For Edward Moya, market analyst Senior According to the consulting firm Oanda, the gigantic rise in inflation has played a key role in the fall in prices.
“Cryptocurrencies fell after persistent inflation triggered a wave of aggressive central bank adjustments that led to a sharp drop in risk assets,” he told BBC Mundo.
The desperate response of large institutional investors moving huge amounts of capital also played a role.
“Panic Selling Accelerating Crypto Recession after all, the institutional money that entered the cryptocurrency space in 2021 saw its investments reduced,” says Moya.
With all the wind in the face, there are “crypto devotees” or “crypto evangelists” who are convinced that the current slump – especially bitcoin – is part of one of the ups and downs cycles. lows that have been present since the arrival of digital currency. on the market in 2009.
“We don’t sell”
His key argument is that in the long term, a bitcoin will be worth hundreds of thousands of dollars, which is why this bear cycle is only part of the big rally.
Let the current bitcoin price be less than a third what it was worth a few months ago is not a sign that the bubble has burst, they say.
They are the ones who say to whoever wants to listen:we do not sell (“we do not sell“)as if it were a battle cry.
As a brotherhood that wants to incite its members to resist, when asked what to do with bitcoins, they respond with a resounding: “HODL” (which in Cryptonian lingo is a way of saying “hold”, it’s i.e. hold or sustain.
The term ‘HODL’, still capitalized on social media, apparently originated in a Bitcointalk forum, when a user wrote “I AM HODLING”, with spelling mistakegiving rise to one of the best-known expressions in the world of cryptography.
This is precisely what some “shrimp investors” and some “whale investors” do: resist the temptation to sell, i.e. HODLING.
The shrimp and the whale
Continuing in the world of Cryptonian lingo, not everyone in this universe is in the same category.
Shrimps are those with less than one bitcoin (which today is worth around US$23,000).
The whale are those who have more than one bitcoin in their wallet Investment companies and miners are tasked with generating bitcoins using powerful computer networks that run on blockchain technology, as cryptocurrency analytics hub Glassnode explains.
James Check, chief analyst at Glassnode and avid cryptocurrency advocate, says that despite the ups and downs of the market, there are shrimp and whale investors who have continued to buy bitcoin in 2022.
Especially shrimp, considered retail investors.
“Bitcoin is a unique asset in that a large portion of those with a strong belief in this smart money are retailers,” he argues in a dialogue with BBC Mundo.
This is largely due, he adds, to the fact that since the inception of bitcoin and during the time it began to grow, it was the shrimp that bought the digital currency, i.e. say ordinary individuals, rather than millionaires or institutional funds.
Other reasons have to do with the fact that currency education has increased and that, from their perspective, there is transparent data in the market.
“The small investor is ready to bear any downfall.Dawhile the whale is more likely to abandon ship, if he thinks there is a prolonged period of downward pressure in the crypto market,” says Moya.
“The crypto winter could end in these months or early 2023, but so far small investors and whales seem determined to hold on to their cryptocurrencies,” the economist explains.
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