London, UK, 5th Feb 2022, Binary News Network, Bitcoin has recently lost more than 5% of its value since mid-December; Ethereum has shaken the market at the beginning of January. Is this a coincidence, or are they worth it? Here are some explanations if you want to know why cryptocurrencies are so badly affected over time
FinancialCentre broker, Ben Martin, says the first reason is that the rise was too high and fast for cryptocurrencies. The price rose too fast, and it is normal to make a pause.
The second reason is that the investors are only interested in the highest possible profit. If they think they can get more money somewhere else, they will certainly do so. That’s why we see big traders (banks, hedge funds, etc.) buying before selling again to make a profit.
Now is the lowest point, and we can surely say that cryptocurrencies will start rising again. The worst has passed; we must choose the right moment and buy coins at a good price. However, be careful! Volatility remains very high, and you should keep your cryptos in cold storage until you sell them again. If you keep them in an Exchange, the price will fall again, and you will only be able to sell them at a loss.
Don’t forget that virtual currencies are linked to Bitcoin and Ethereum, proposing great projects with many innovations. So instead of thinking about short term gains, we must think about long-term profits. If we believe in blockchain technology, then cryptos are the future.
What are the Issues with Bitcoin?
First, the transaction fees are skyrocketing. The reason is that bitcoin miners prioritize transactions that pay higher fees.
The second issue with Bitcoin is scaling. Segregated Witness technology has been proposed to solve this problem, but it has not been approved for several reasons (the main one being disagreement between miners).
We must also admit that Bitcoin’s user interface is not very intuitive (the opposite of Ethereum), and it needs to be made easier for the public.
What are the Issues with Ethereum?
The first problem with Ethereum is that everyone wants it! This causes congestion in transactions which affects scaling. The second issue is related to ICOs. Hacking attacks have been attributed to Ethereum’s smart contracts, which could scare away investors.
Finally, the third major problem with Ethereum is becoming too popular for its good! The prices are now proportionally higher than Bitcoin as everyone wants a piece of this cake. This lets us think that Ether will continue to rise in value and temporarily overvalued.
How can the issues be resolved?
Bitcoin’s scaling problem is to choose between the two main proposals. First, increasing block size will lead to a hard fork and second, Segregated Witness, which needs a soft fork.
Ethereum must do three things: First, implement “Proof of Stake”. Second, continue developing and promoting scaling and third, decentralize the nodes to avoid hacking attacks.
What does this mean for investors?
The rise of cryptocurrencies is inevitable, but we must not forget that it is a very risky market. Everyone should only invest money they can afford to lose, and we must not “chase” coins (i.e., buy them at a much higher price than the current one). That said, it is likely that this market will rise again soon, and we can learn from our mistakes. For instance, I thought that Bitcoin would never fall under $10,000, but it did fall to $9,000, and I was naive because you must always expect a crash!
As for Ethereum, its technology is superior to Bitcoin, and it will probably continue to rise. However, its price has skyrocketed, which causes some problems for the public (congestion in transactions) and big investors (high prices). As a result, Ethereum’s price might fall again at some point, but this will be an opportunity for smart investors to buy it again at a low price.
The main goal of cryptocurrency is to be a transaction method and investment tool, not a digital asset that we can speculate on.
Be careful! Volatility remains very high, and cryptocurrencies will probably fall again at some point. Only invest money you can afford to lose and don’t chase the market if prices rise again. Cryptocurrencies are linked to Bitcoin and Ethereum, which are great projects with many innovations. So instead of thinking about short term gains, we must think about long-term profits. If we believe in blockchain technology, then cryptos will be the future!
What is the Future of Cryptocurrencies?
Cryptos are here to stay! Blockchain technology represents a revolution in transactions and decentralization. This means fewer intermediaries, more transparency and greater fairness among all players in the financial industry (investors, companies etc.). Of course, we can open the door to new opportunities with cryptocurrencies whether you are an individual, company or politician. Crypto is the next big thing, and both Bitcoin and Ethereum are paving the way for everyone else!
What should we do with our Cryptos during this Bear Market?
The best plan is to wait until everything stabilizes (bitcoin fees, ethereum scaling etc.). Just hold your cryptos in cold storage until then. If you keep them in an Exchange, the price is likely to fall again, and it will be impossible to make a profit.
Don’t forget never investing money you cannot afford to lose, and always do your research! We hope this article helps you understand more about cryptocurrencies, and we wish you the best of luck.
Disclaimer: Our content is intended to be used for informational purposes only. It is very important to do your own research before making any investment based on your own personal circumstances. You should take independent financial advice from a professional in connection with, or independently research and verify, any information that you find on this article and wish to rely upon, whether for the purpose of making an investment decision or otherwise.