Crypto Crash & Bitcoin Crash: Why? Recovery, Futures Markets & Hedging

Will Crypto Crash?

Anyone who tells you when and where it will happen is simply guessing. The correct answer is no one knows when (or even if) a crypto crash will happen. Let alone how bad the crash will be in percentage terms. 

Could crypto crash 20%, 40% or 85%…? 

The real question is, if the price crashes, will it stay low and for how long? Because each time BTC has crashed, it’s bounced back by hundreds of percent, or more. 

It is that very volatility that attracts investors and traders into the crypto space. If there was no volatility and crypto prices did not move very much then there wouldn’t be much opportunity to make money.

Let’s examine what happened when crypto crashes but then importantly what happened after.

Bitcoin Crash

The 2017 Bitcoin Crash

Bitcoin ripped up to an all time high of $19,783 on December 17th then crashed back down to below $11,000 just 5 days later. A fall of 45%. Then nearly a year later in November of 2018 it was trading at just $5,500. 

Look up the price of Bitcoin today on Coinbase – and you’ll see that even buying the peak in 2017; today you would still have made significant gains.

…then work out how much you would have made if you bought the low in November 2018 of $5,500.  

The April 2021 Bitcoin Crash

Reaching a high in April 2021 of around $63,000, Bitcoin crashed back down to $30,000 by July.

A crash of over 50% in just 3 months!

But this is what investors have come to expect in Bitcoin and other crypto assets; it is a highly speculative, volatile, unregulated ‘asset’.

If you are going to buy any cryptocurrency, then you should do it with a well established and trusted exchange like eToro, Coinbase or Binance. 

Because eToro is listed on the stock exchange it is regulated and authorised by the appropriate bodies and as such, it comes top of our list for the best crypto wallet in the UK. 

Why is Crypto Crashing? 

Simply because there are more sellers than buyers in the market. Then as the price moves lower this makes more people want to sell but without buyers the price falls further. This downward spiral continues until there is an equilibrium in sellers and buyers. 

Negative News Flow

Bad press or negative headlines could be a reason for a move in the price. This could be as simple as someone famous selling their crypto or tighter crypto regulation in a certain country. 

Negative headlines or negative use cases for crypto could be a reason for a trader not holding crypto to ‘short’ crypto essentially making a bet that the price will go down from where it is now and profiting from this.  

Would A Crypto Crash Be Unique?

No, not really when you consider that house prices have crashed; several times. Plus we have had stock market crashes every 10 or so years. The last two stock market crashes were in 2008 and before that was 2000 when the so-called ‘dot com bubble’ burst.  

Is Crypto Just A Modern Day Gold Rush?

The chance to make life changing amounts of money in crypto is the lure for most people but it’s not the only reason. People have grown to mistrust banks and the fractional lending system. Bitcoin was ‘created’ in 2008 as a result of the GFC (Great Financial Crash) and is rapidly becoming adopted across the world as a medium or exchange or store of value. 

Empires don’t last forever. Britain was the world’s leading economic powerhouse and the pound sterling was the world’s reserve currency. Then the mantle was passed to the United States and the dollar has since been the world’s reserve currency with oil, gold and even bitcoin being valued in dollars. 

But China now is the new world super power having overtaken the US and history has taught us that with that change, comes a change in the world’s reserve currency.

Will China’s currency become the world reserve currency or will a cryptocurrency like Bitcoin (BTC) steal the limelight instead?

Are We In A Crypto Bubble?

Possibly and maybe not; but whether we are in a bubble or we aren’t in a bubble is irrelevant. That alone doesn’t mean things will crash tomorrow. Bubbles can last years, look at some of the famous bubbles in history and you see what we mean. 

There are plenty on record from the housing bubble, dot com bubble, railway mania, southsea bubble and maybe the most famous the tulip bubble. Yes they have all crashed but we still ‘tech’ today after the dot com bubble, we still have a housing market after several crashes and we still use the railway. 

Meaning most things with utility and a future ‘use case’ will stick around but how much people are willing to pay for those things could change and this could affect the price.  

How To Invest In Crypto: without buying a coin!

They say the fortune in the gold rush wasn’t digging for gold it was in selling the shovels. And in the same way that has been true in crypto aswell. 

What are we talking about?

Well, crypto mining companies have popped up over the years, raised millions of dollars to fund the purchases of the hardware required to mine crypto, listed on the stock exchange and have seen their stock prices go up, sometimes in the 1000’s of percent!

Mapping out the crypto value chain you could spot unique opportunities. Whether that is in the mining of digital assets through stock exchange listed companies like Bitfarms (ticker BITF) or Marathon Digital Holding (ticker MARA). Or buying stocks in crypto exchanges like Coinbase that facilitate the exchange of crypto between two parties in return for commission. 

These are just two ways for you to gain ‘safer’ exposure to the crypto industry without having to study any charts and invest directly in any coins. 

In October 2020 BITF stock was trading at around $0.36 take a look on eToro what it’s trading at today. 

Will Crypto Recover? 

NFT’s (Non Fungible Tokens)

Cryptocurrencies need a use, whether that’s a store of value or a medium of exchange. NFT’s present a solid use case for crypto. Whether you are minting NFT’s or buying them on secondary exchanges like Opensea or MagicEden you require crypto to buy them

So as the NFT market grows over the coming years that will bring more people into the space that require crypto. 

Who could benefit? 

For crypto projects with finite token supply this could be good news. As with supply fixed but demand up, the price will likely rise. This is simple supply economics. 

Most NFT’s sold currently are bought with Ethereum (ETH), so with demand rising for ETH could the price rocket north? Absolutely it could. Eth is probably in every crypto purists portfolio as it is a heavy weight that has been in the market since the beginning. If demand for ETH 10X then could the price 10X? Yes it could and it has done it before.

All NFT’s sold on Opensea, the largest NFT marketplace are priced in ETH. 

But people report one common hindrance when doing anything on the Ethereum network however. Gas fees. So it’s interesting to hear of one smaller cryptocurrency project that has solved this issue and NFT projects are scaling fast on it: Solana (SOL)

NFT Projects on Small Cap Coins

Solana has a fraction of the fees that the Ethereum network has and it is also lightning quick. So whilst the mainstream adoption of ETH continues and will be maybe 10X, SOL being a smaller cap coin, could still 100X. 

Sites like MagicEden are exclusively for projects on SOL and the site and the projects being listed are growing rapidly. 

Crypto Futures

Do you like Bitcoin, but its daily swings up and down have left you on the sidelines? Then Bitcoin futures could be right up your street. 

Bitcoin futures are the latest offering from powerhouse crypto exchange ‘Binance’. Binance are the largest crypto exchange in the world and even have their own DeFi crypto wallet called the ‘Trust’ wallet.

Bitcoin Futures

Bitcoin futures work in the same way as ‘traditional’ futures do. They are used by investors who want to take a position in the market over a fixed duration. 

For example you think Bitcoin by the end of the year could be worth double or even triple but you don’t want to have to hold the risk of a normal cash long position, with all the volatility that comes with it?

Then you could buy a futures contract with a specific date in the ‘future’. Then on that specific date in the future if Bitcoin is worth more than when you bought the future, you will have made profits. 

Crypto Crash Coming!

Think the crypto crash is coming? If you are a firm believer that crypto is going to crash and Bitcoin along with it, then you can short the crypto markets and make huge gains.

To do that you will need to have an account with an exchange like eToro, Coinbase or Binance. Its eToro for us because they are listed on the stock exchange meaning they are authorised and regulated by the relevant authorities which is a bonus as nearly the whole crypto market is unregulated. . 

Once you have an account, it’s easy, just hit the short button (not financial advice!).