June 20, 2024

Cryptocurrency: the most volatile way of making money

Cryptocurrency prices have steadily dropped since November, only recently starting to climb back upwards again. 

Bitcoin and Ethereum have dropped 34% in the last 90 days and other smaller cryptocurrencies like Shiba Inu and Dogecoin have fallen 37% and 41% respectively.

Bitcoin went from its peak of over $65,000 back down to $36,000 in the span of just about two months.  

While there are many theories as to what has caused the most recent crash, it seems to be a culmination of a lot of reasons. 

The European Union introduced the Crypto Travel Rule that went into effect in June 2021. The law is meant to collect and share customer data for transactions over a certain threshold to ensure legitimate transactions and stop money laundering. 

On top of that, the Federal Reserve has moved to raise interest rates and end its stimulus program earlier than expected causing the stock market to fall as well. The lack of stimulus and interest rates affect both the small purchasers and large investors of crypto. 

And then to add on to all that, the federal reserve announced it would be taking steps toward launching a U.S. digital currency, something similar towards electronic cash that would be backed by the central bank. Although this talk ultimately reached no conclusion.

Some good news has come out of this for cryptocurrency enthusiasts, with crypto being so low currently, both the “little guy” and the large investors are taking advantage of the prices, leading to Bitcoin and other cryptocurrencies slowly gaining in price. 

El Salvador adopted bitcoin as a legal form of currency buying up $21 million worth of it back in September. They followed this up by buying another $15 million on Jan. 21. Both occasions helped raise the price of bitcoin and other cryptocurrencies following the purchases. 

Bitcoin is back above $40,000 and other cryptocurrencies show similar results. 

Crypto continues to be a very volatile market unlike what traditional stocks have proven to be. In the past, if the stock market crashed you could experience a devastating 20% loss and that could take multiple years to get back to where you were. 

Now the ability to lose 50% of your portfolio with the near guarantee that it will come back in six months to a year has struck a chord with a lot of middle-aged and younger investors. Especially when it easily can go the other way, gaining as much as 1000% similar to how Shiba Inu and Dogecoin did. 

Regardless of what comes of legislation across the world regarding cryptocurrency, it looks like crypto is here to stay.