In recent months, the cryptocurrency market has experienced a significant decline. Bitcoin's market capitalization fell to $ 20,000 for the first time since 2020.
This has led to panic among investors who are losing money as they see their investments shrinking, while experts periodically report that the race for cryptocurrencies is growing. But will this setback soon pass, or is there a cause for concern?
What are cryptocurrencies?
It is worth having a basic knowledge of cryptocurrencies before delving into why the downturn started. Cryptocurrencies are digital currencies that use cryptography to regulate the creation of money and verify the transfer of funds. They first appeared in 2009 when an anonymous programmer created a new peer-to-peer online payment system, also known as Bitcoin. Today, Bitcoin has become one of the largest cryptocurrencies. Cryptocurrencies have become so popular that a whole trend of crypto casinos has emerged: you can learn more about it at bitcoincasinos21.com.
Cryptocurrencies are decentralized, meaning they cannot be controlled by a central authority. This distinguishes them from traditional fiat currencies such as the US dollar, the euro or the Swedish krona, and it has also led to their great volatility.
Since cryptocurrencies are not "physical" coins, according to cryptomeister's guide to crypto wallets, digital wallets are commonly used to secure cryptocurrencies online and connect the wallet to various trading platforms.
By the way, one of the popular cryptocurrencies is Ethereum: read about some important changes related to it in this post.
Why have cryptocurrencies fallen in value?
Cryptocurrencies are a volatile asset class. Their value can fluctuate daily depending on market conditions and many other factors. Recently, the value of many forms of risky investment has increased: stocks, mutual funds and, of course, cryptocurrencies.
Most experts agree that this is due to the fear that countries will raise their interest rates. This, in turn, reduces risk appetite and leads to more and more people keeping their money in their regular bank account instead of investing it, in particular in cryptocurrencies.
Is there a future for cryptocurrencies?
Most things indicate that cryptocurrencies have a future. Many agree that despite the recent sharp drop, the currencies are here to stay. There are many reasons why cryptocurrencies will remain relevant in the future, not the least of which is that they are decentralized and therefore harder for any government or company to control.
More and more people have opened their eyes to currencies, rising interest rates are likely to decrease over time and fact that certain currencies such as bitcoins are available in limited quantities. This helps to stabilize the value of the coin. However, for people who wish to invest their money in this risky asset class, it is important to have a basic understanding of how technology and security work, what the laws and regulations look like, as well as a good knowledge of their own risk appetite.