It had never happened before, and here we are again: the cryptocurrency market collapsed. On the night of December 4, all major cryptocurrencies lost value in sync – there hasn’t been such a dramatic drop since May 2021.
For example, bitcoin, which was trading around $57,000 the day before, collapsed to $42,000 in a moment.
This article, which was prepared together with the portal IQ Сoins, explains why the fall – it’s good and tells what benefits it has to extract, even if about cryptocurrency you still do not know anything good.
Why have cryptocurrencies fallen so much?
Most likely another strain of the coronavirus, Omicron, is to blame. Traders may have been afraid of potential new restrictions that could change supply chains and hit the economy again. It’s not just cryptocurrencies that have gone down.
Stock and commodity markets around the world and emerging markets currencies also went into the red zone. U.S. indices fell by an average of 2.5%, European – from 2.5% to 4%. Slightly more than 1% fell against the dollar and the Russian ruble.
Usually, there is no such correlation between stock prices and prices of cryptocurrencies, but not this time. That’s because there were other news stories this fall, to which cryptocurrencies react much more sensitively.
It is impossible to predict when cryptocurrencies will collapse next with all this news. What does not stop you from thinking about how to prepare for it and which cryptocurrencies to invest in at a low price when it happens.
1. Bitcoin and Ethereum
Buying Bitcoin and Ethereum cheap will never be possible – you have to accept that. But it is tempting to buy shares of these cryptocurrencies when they are cheaper than usual.
In October many investors raised their forecasts for BTC again. There are several reasons, but the main one is the launch of a cryptocurrency-based investment fund in the United States. Washington is finally going to give the industry a comprehensive regulatory strategy.
If regulators take the toughest approach to most cryptocurrencies, the market could divide into assets recognized by U.S. authorities and those that do not have this status. But a number of cryptocurrencies would fall into the first category.
Bitcoin is the number one contender here, just like Ethereum, on the basis of which most of today’s popular NFTs are built.
2. Cardano
Cryptocurrency Cardano (ADA) – the sixth-largest cryptocurrency as of November 2021 – may move up a few more positions after its official appearance in the decentralized finance sector (DeFi).
News of the emergence of so-called smart contracts – contracts that do not need intermediaries because both parties sign it themselves on the blockchain network – may also spur interest among buyers.
3. Binance Coin
Binance Coin (like Cardano) is of interest to investors primarily in the context of DeFi as a competitor to Ethereum.
While Ethereum’s creators have been slow to update the network and speed up transactions, Binance Coin has an excellent chance to beat the competitor on the turnaround. In short, investing in this cryptocurrency could very well be a long-term prospect.
4. XRP
Cryptocurrency XRP may get a positive revaluation and serve as a promising cryptocurrency investment. In addition, the purchase threshold for this coin is quite low – 1 XRP is worth less than a dollar.
Ripple, the company behind XRP, is actively developing technical solutions for cross-border payments. Their products may soon be used by several central banks in Asian countries and the United Kingdom.
There’s a downside to consider: the Ripple company issuing the U.S. Securities and Exchange Commission (SEC). They may be able to prove that their coin is not a security. But the risk of XRP being banned in the U.S. is still worth considering.
5. Polkadot
The Polkadot project was designed to increase the compatibility of different blockchains within a single platform. The project has even been called the “Ethereum killer.” The company is growing rapidly. In 2020, it launched a “testing ground” for codes – Kusama.
And although the cryptocurrency PolkaDot is just an appendage to the main goal of the network, it is quite actively used both in the ecosystem itself and outside of it. The cryptocurrency is now already the 9th largest among the top 100 cryptocurrencies.
6. Avalanche
Avalanche (AVAX) token is a cryptocurrency of the same name network. It aims to speed up token transactions and make smart contracts and DApps (decentralized applications) easier and faster to use.
In mid-November, Avalanche announced a partnership with one of the giants of the audit market, Deloitte. This turned into a surge in AVAX – the token rose from $94.03 on November 16 to a high of $110.31 in just a couple of days.
At the time of writing, Avalanche was the 10th largest cryptocurrency in the world. Analysts agree that this coin’s prospects for 2022 are brightest – by the end of the year, according to various estimates, it will be worth between $230 and $280.
7. Chainlink
A relatively young, but already visible and bright player on the crypto market, Chainlink pursues a similar goal to Polkadot – to make a service intermediary between blockchain and smart contracts.
Among Chainlink’s partners in the global payment system SWIFT, the same one from which the U.S. has been threatening to disconnect Russia in the most radical version of sanctions for seven years.
In addition, Chainlink was bought into its portfolio by investors of the renowned Grayscale fund. Another user of Chainlink recently became the international news agency Associated Press.
It is true that the cryptocurrency is deservedly criticized for its too weak recovery from the market decline, and also for the fact that most of its turnover is held by large investors – now they own about 7% of the total volume of Chainlink.