Many of the top cryptocurrencies have been witnessing significant declines over the past three months. There were times where we saw an all-green market; however, volatility hit once again as Bitcoin, the world’s strongest cryptocurrency fell from a three-month high of $52,000 to $43,000 amid fear, uncertainty, and doubt caused by China once again.
The cryptocurrency market has gone through a roller coaster as most cryptocurrencies like Etheruem, Solana, Cardano, and even meme coins like Dogecoin saw pleasant weeks. Ethereum, the second-largest cryptocurrency traded as high as $4000 per Ether until it saw a sharp decline reaching $3,000 per Ether. Cardano, the third-largest cryptocurrency traded as high as $3 per ADA until it fell off to trading at almost $2, following the FUD in the market. Solana, another promising cryptocurrency, traded as high as $311 before crashing around the $140 mark following the fear in the market.
The Cryptocurrency market has been extremely volatile over the last month. While the market has seen significant highs it also has seen significant lows over the last three months. So what’s controlling the cryptocurrency market?
China has recently emerged as the crypto market’s biggest antihero. The authorities in the country are working hard to eliminate everything related to cryptocurrency, mining, and trading.
The claim that illicit operations include providing bitcoin trading services to mainland Chinese individuals had the most detrimental impact. Residents of the Middle Kingdom used exchanges and other crypto-platforms that were based outside of mainland China’s jurisdiction, but the supply of such services may now be prohibited by the Chinese government.
The control of mining activities by local governments is now considered a bonus in China’s National Development and Reform Commission’s performance criteria. The treaty, which was signed on September 24th, puts an end to any further development and investment in the cryptocurrency sector in the country. Furthermore, the People’s Bank of China fueled the flames by announcing that cryptocurrency-related operations are prohibited.
Governments such as China are not banning cryptocurrencies because they believe the technology will fail. It’s because they want to be in command of a massive experiment with billions of dollars at stake.
China has now joined a select group of countries that have banned cryptocurrency. And it’s a 180-degree turn from El Salvador, which made Bitcoin legal tender earlier this year and was praised by both Libertarians and Bitcoin supporters. Some see an opportunity in China’s intensifying crackdown in the United States, where crypto trading is legal but officials are keeping a close eye on it.
Millions of investors wishing to profit from the crypto frenzy will need to understand the numerous facets of this multi-pronged war for market domination. The battle is set to resonate throughout the global financial system, where products like Bitcoin exchange-traded funds, oddly called digital tokens, and NFT assets are being announced on a daily basis. Digital currencies are being embraced by major financial institutions, as well as the ultra-rich.
Here’s what happened because of China’s Ban on Cryptocurrencies:
According to crypto-data websites, the value of the world’s cryptocurrencies plummeted to a low of around $1.8 trillion on Friday, plummeting roughly 9% and losing $188 billion in market value within just three hours following China’s statement.
The sharp drop erased nearly all of the gains made since Monday’s global stock market sell-off prompted the crypto market’s worst drop in weeks, with key cryptocurrencies bitcoin, ether, and Solana’s sol all plummeting between 6% and 10% on Friday morning.
Now that we’re in a bearish market, there’s one asset that isn’t affected by the chaos going on in the Cryptocurrency market and its stablecoins. Since Stablecoins are pegged to fiat currencies and are somewhat centralized and decentralized at the same time, they’re the only asset that hasn’t been affected by the bearish and bullish market. And interestingly, Stablecoins have proven to work as an amazing tool for steering through both the bullish and bearish markets.
Before we understand how Stablecoins prove to be beneficial for traders and investors alike in both chaotic and pleasant market conditions, lets understand bearish and bullish markets.
Bearish and Bullish Markets
Whether it’s cryptocurrencies, equities, real estate, or any other asset, markets may be described as bullish or bearish. Simply said, a rising market is a bull market, whereas a falling market is a bear market. With daily (or even moment-to-moment) market volatility, both expressions are frequently used to describe:
- Periods of primarily upward or downward movement for longer periods of time
- Swings in the market that are significant in either direction (20 percent is the widely accepted figure)
What is a bull market?
A bull market is a period of time when most investors are buying, demand exceeds supply, market confidence is strong, and prices are increasing. If you see a market’s prices rapidly rising, it may indicate that most investors are enthusiastic or “bullish” about future price increases and that a bull market is likely to begin. Investors that think prices will increase over time are called “bulls.”
As investor confidence improves, a positive feedback loop occurs, attracting additional investment and driving prices upward. Because public confidence in a cryptocurrency has a significant impact on its price, some investors try to gauge investor optimism in a market (a metric known as “market sentiment”).
Even in a bull market, there will be dips, corrections, and fluctuations in the price of stocks. Short-term declines in the stock market may be readily misconstrued as the end of a long-term bull market. This is why it’s crucial to look at any potential signals of a trend reversal in a broader context, taking a look at price behavior over longer time frames. (Investors with a shorter time horizon frequently refer to this as “buying the dip.”)
Bull markets don’t last forever, and investor confidence will eventually dwindle – this might be sparked by anything from poor news, such as unfavorable legislation, to unforeseeable events, such as China banning cryptocurrencies. A large price drop may indicate the beginnings of a bear market, when investors fear more price declines, leading to a negative cycle as they sell to prevent further losses.
What is a bear market?
A bear market is one in which supply exceeds demand, confidence is low, and prices fall. Bears are pessimistic investors that expect prices to continue falling. Trading in bear markets can be tough, especially for rookie traders.
A bear market’s end and the point at which the lowest price will be reached are notoriously difficult to predict, in part because rebounding is typically a gradual and unpredictable process, influenced by a variety of external factors such as economic growth, investor psychology, and global news or events.
They can, however, bring possibilities. After all, if you have a longer-term investment strategy, buying during a bear market can pay handsomely when the cycle turns around. Short-term investors should keep a watch out for price spikes or corrections, which may signal a turning point in the market. There are further tactics for more skilled investors, such as short selling, which is a way of wagering on an asset’s price falling. The practice of dollar-cost averaging, in which a fixed amount of money (say, $50) is invested every week or month, regardless of whether the asset’s value is increasing or decreasing, is also popular among cryptocurrency investors. This reduces your risk by allowing you to invest in both up and down markets at the same time.
How are Stablecoins used in Bearish and Bullish Markets?
Even if we’re all riding a metaphorical rollercoaster, we can nevertheless try to maintain some stability. By combining the potential of cryptocurrencies and the stability of existing fiat currencies, stablecoins safeguard us against price fluctuation. It’s ideal for the bitcoin market, where users may benefit, stop losing money, and save their funds.
Stablecoins serve as a link between cryptocurrency’s unpredictable nature and the mainstream world of fiat currency. These currencies are non-volatile blockchain-powered digital assets that combine the advantages of both crypto and fiat currency. Stablecoins have been identified as a place for investors to take refuge as uncertainty and panic have permeated the market.
Stablecoins’ stability has been a driving force in raising investor confidence in these digital assets, and an increasing number of traders are turning to them as a way to store their capital and make payments outside of the unstable fiat currencies.
There’s a growing consensus that the impending bear market will provide enough opportunities for value investments. This means that investors could take advantage of the declining value of digital currencies like Bitcoin and Ethereum to make purchases in the hopes of betting on a return to form.
If you believe that the declining value of Bitcoin and other altcoins is due, in large part, to market jitters and will return to former levels after concerns about China’s ban have subsided, this strategy could be a good fit for you.
Because Stablecoin prices are linked to real-world assets like the US Dollar and gold, investors are less likely to suffer the same kind of debilitating losses as the rest of the crypto market as a result of the high levels of volatility connected with this momentous event.
It’s worth looking away from speculative markets and investing in some short-term stability in these times of record amounts of uncertainty. The safest bet available for investors in this period of uncertainty is to keep assets in the stablecoins market. This allows individuals to stay connected to the crypto markets while still securing their funds in pegged currencies. As share prices improve and there is ample indication that the bear market is finished, there may be lots of possibilities available.
The Cryptocurrency market will continue to stay extremely volatile and unpredictable and it will continue to be affected by massive players such as China. However, large traders and little traders can beat the game by leveraging stablecoins and its guaranteed stability to stay safe during these chaotic market swings.