- The entire cryptocurrency market now has a market capitalization of US$1.2 trillion, a massive drop from the US$2.9 trillion in November last year
- Some of the largest cryptocurrency exchange platforms- Binance and the OKX exchange- have halted the trading of Terra and Luna
- A fragile stock market and a bad Federal Reserve environment are the scariest things facing the crypto market
This year has seen a heavy downpour in the crypto world; probably the most uncertain the market has ever been. From the look of things, It appears that the market will eventually test all protocols in the market. The entire cryptocurrency market now has a market capitalization of US$1.2 trillion, a massive drop from the US$2.9 trillion in November last year.
A crash to wipe out all fake cryptocurrencies?
The test on the Tether USD (UST) has shed light on the weaknesses of algorithmic stablecoins. Stablecoins are cryptocurrencies whose prices remain stable even if the crypto market sells off. But the biggest crash in history has nearly changed that meaning.
Read: Is crypto addiction having the same effects as drug abuse?
Crypto enthusiasts believe that any cryptocurrency or altcoin that does not have a legitimate base will not survive this bearish market. One main lesson to take home is that all networks and protocols must be built to withstand various attacks, hacks and tests.
This is the cloud in the silver lining. One of the hard things to hear for crypto traders is: Is this the best time to buy bitcoin in this bearish market?
Those who have been in crypto for a long time can confirm that what has happened to Luna, the sister cryptocurrency of algorithmic stablecoin Terra and one of the biggest protocols in the crypto world, has never happened since people started trading altcoins. For the last few days, Luna has dropped to near zero! A fragile stock market and a bad Federal Reserve environment are the scariest things facing the crypto market.
“I lost over US$450,000, and I cannot pay the bank,” reads one of the top posts on the Reddit forum for Terra Luna. “I will lose my home soon. I’ll become homeless. suicide is the only way out for me.” These sentiments come when crypto trading is adding to the list of addictions affecting the younger generation that has dominated the crypto market.
Luna, Bitcoin and Ethereum crash
While Luna’s collapse is the most conspicuous, many other cryptocurrencies are on a downfall. Bitcoin was trading at US$28,674 on Friday, 00:20 UTC, nearly 60 per cent from its all-time high of US$69,000 in November 2021. Ethereum stood at US$1,938 from an all-time high of US$4,891.
Tether USD, a stablecoin linked to the US dollar, has experienced a drop, sending the market into total panic.
Some of the largest cryptocurrency exchange platforms- Binance and the OKX exchange- have halted the trading of Terra and Luna. Indian exchanges WazirX and CoinDCX have also delisted the currencies from their platforms to prevent new investors from buying them.
“An exponential amount of new LUNA were minted due to flaws in the design of the Terra protocol. Their validators have suspended their entire network, resulting in no deposits or withdrawals possible to or from any exchange,” Binance CEO Changpeng Zhao said in a Twitter post.
“Some of our users, unaware of the large amounts of newly minted LUNA outside the exchange, started to buy LUNA again, without understanding that as soon as deposits are allowed, the price will likely crash further. Due to these significant risks, we suspended trading,” Mr Zhao said.
Read: Getting Started in Cryptocurrency Trading
However, the Terra blockchain has resumed activity after a nine-hour halt.
Crypto investors activated panic mode on May 12 when the price of bitcoin hit its lowest price in more than a year.
Lessons to learn from the crypto crash
To those who are crypto enthusiasts, here are some lessons to take home from the crypto crash:
- Take the first loss. When you are trading crypto, and it shows signs of a heavy dip, exit the market! Most traders hope that it will pump up again and end up with a heavier loss than they would have settled for.
- Do not overinvest. Invest in a portfolio that you will be able to track without feeling over pressured.
- Bitcoin is the safest investment. Bitcoin is the most decentralized network and has the biggest market cap. The network is under the backing of national governments- El Salvador and the Central African Republic- and it works under the proof of work system.
- Listen with an open mind. Most crypto traders view every negative comment on crypto as an attack, and most of the time, they miss the message.
- Take the loss early and make a decision. When a loss hits you, do not allow yourself to sink into depression. Take the loss and decide whether to exit the market, take a break or continue trading in other protocols.
- See a therapist. If the loss weighs heavy on you, visit a therapist, precisely one dealing with addictions. Crypto trading is an addiction.
