For the first time since July 4, 2020, the biggest cryptocurrency by market cap, Bitcoin, has fallen under USD19,000 to USD18,841. This has spurred new controversy and ideas about the future of technology, including why this is happening.
The blame game is already in process, with claims that various governments and phenomena are the main reasons Bitcoin did not recover from a historic all-time high of USD65,000 in November 2021.
Currently, the the 3 main culprits are:
- US inflation and recession
- Russia’s war with Ukraine and the closing of the Nord Stream
- China’s drop in manufacturing
But, neither of the 3 is the ideal sacrificial lamb. In fact, none of the cited phenomena could drop the digital currency on its own. Rather, the drop is due to a mix of external factors combined with the long-awaited market correction after the quick expansion during COVID-19.
Experts agree that technology certainly has a place in the future; cryptocurrency is here to stay. But very few are ready to separate political struggles from crypto investments.
New Focus on More Pressing Resources
Newer technologies such as NFTs and even iGaming have grown exponentially during the pandemic. Cryptocurrency, however, has carved a place in international and individual trade. But, the current market still has more pressing issues.
Nations are currently fixated on energy due to the global gas crisis and the looming energy crisis in the US and Europe. Most investors are more likely to liquidate their digital currencies and invest in companies that are more likely to bring bigger benefits.
For many institutional and boutique investors, crypto and fintech are currently last on the list. Apart from venture investors still betting on new tech, few are willing to keep their money in the so-called “old technology”.
Additionally, investors are currently renewing their interest in food production, especially when it comes to expanding capacity. Due to growing food prices, this could be counted as a good financial investment, contributing to social stability.
War Is a Hurdle to Trade
Russian aggression on Ukraine, which is now entering its 7th month, may not be the dominant reason for the drop in Bitcoin, but it is certainly a factor. Increased hostilities—mainly between Russia and the West and the US and China—do not bode well for international trade.
Additionally, investors face a contrarian issue, where nations prioritize political issues over rational moves. Russia has announced the legalization of crypto for international trade, and many western investors dropped out of the market.
Still, the aggression against Ukraine and the EU sanctions toward Russia is having a legitimate impact on the market. Russia and Ukraine are both very large food and fertilizer producers. With both of them out of the market, international food prices took a hit, further pushing investors to look to food production.
Manufacturing issues are also pushing investors away from crypto. For instance, countries have moved out of China and to new production locations. This has spurred investors to move from crypto, which is interesting only in developed markets, to manufacturing being opened in places like India, Southeast Asia, and South Eastern Europe.
Russia and China are open to trading internationally in their local currencies and Bitcoin, forsaking the US dollar for that purpose. But, dealings with other countries—like Turkey or the Middle East—may not include cryptocurrency as much as national currencies.
Investors Take a Contrarian Approach
In the past, investors guided their investments with internal feelings about political matters. Namely, many people have invested in crypto because it promised liberty, future, technology, and other buzzwords.
Investors may focus on trends rather than utility in the current social environment. Seasoned investors, however, can distinguish between popular and useful. This means the current situation can yield some money for wiser investors.
The Technology Has a Future
It is completely reasonable to conclude that cryptocurrency has a future. Although the market in 2022 was not ideal for the product, the utility formed behind crypto trading and production has been valuable.
Primarily, non-centralized currencies can have benefits on international trade. These advantages would also grow with the appearance of nation-size extraterrestrial entities in the future. Space mining might sound like science fiction, but may become a reality in the next few decades.
Additionally, we may see the development of new services and intellectual property that would require cryptocurrency payments. In fact, crypto may help surpass governmental business restrictions.
Finally, cryptocurrency may bring additional security. While Bitcoin has experienced a drop of more than 66% of its value in the last few months, it may soon stabilize near the cost of power to create it, as will other stable cryptos. In that position, cryptocurrency may become a better alternative than other currencies worldwide.
A Good Opportunity for Experienced Investors
At the moment, Bitcoin is around the stabilization value achieved in 2020 before the growth spurt. For many investors, this justifies the prudent investments in Bitcoin.
Boutique investors are currently focused on other issues. This means experienced investors have the opportunity to buy low.
This investment may have some risk, but it can be an opportunity to increase investors’ wealth.