Bitcoin goes on sale – OZY

It’s been a tough year for crypto investors. Bitcoin, the world’s flagship digital currency, is on the decline about 65% from its all-time high price of $68,990 in November 2021. Meanwhile, if you purchased digital currency through Celsius or Voyager lending platforms, your assets are currently frozen while bankruptcy filings continue. Sounds like a good reason to stay away from these volatile assets, doesn’t it? Maybe not.

If you overlay the 1-year trendline of the S&P 500 stock exchange with the price of bitcoin over the same period, you will notice that they move together – although bitcoin is more volatile, with higher peaks and troughs deeper. In other words, crypto markets are not isolated from broader economic trends.

MarketWatch has compared the current dynamics of crypto markets at the Nasdaq stock exchange in the early 2000s when some of the early internet-based companies were overvalued and went bankrupt. Digital currencies, in addition to showing the same general trends as stock markets, are a relatively new animal. And as with the dot-com bubble, some overpriced crypto assets will crash, while others will soar.

Does that mean it’s better to stay away from crypto until things are more stable? This is the approach finicky investors will likely take, while others will buy the sell-offs.

Everyone wanted a piece of bitcoin when the price was north of $60,000, but now that it’s around $22,000, many people aren’t sure — even though, mathematically speaking, it’s two third cheaper than at its peak. Experts are already warning that this sale won’t last forever. Bank of America found that market momentum over the past month indicates that crypto markets are returning to “bullish.”

This just emphasizes that crypto investing is like other types of investing. Buying when markets are down requires the courage of a maverick and the courage to hold on if and when prices fall further.

Maybe people are crazy to put their money in assets that are just strings of numbers on the blockchain. Why have digital currencies ever been considered valuable?

It’s a reasonable question. The answer might surprise you.

The recent collapse of some crypto platforms has done more than highlight the risks involved in investing. He highlighted some initiatives that have retained their value even through market turmoil.

The Class Evidence is a members-only group of artists and creatives. He launched a non-fungible token (NFT) which has grown in popularity because there is a community of people associated with it who buy, hold or trade their tokens, while hosting and attending real-life events – IRL – not just on the Internet. For a new currency to gain value, there has to be a group of people who believe in it.

“Ultimately, decentralization is about a community of people,” says Noah Thorp, CEO of Upside down, a global Web3 company specializing in token launches. “Decentralization” refers to currencies that are not controlled by a central government, such as the US dollar.

Bitcoin is valuable because there is a global community of people who believe in the currency and what it can become. And other digital currencies gain value when a community buys the coin or token because they believe in it – something more than owning it just to own it.

“It is the community use that determines the long term [value of] tokens and NFTs,” Thorp told OZY. “Projects must create assets that the community values ​​over the long term.”

Although it is not legal to print your own money, it is legal to generate your own NFT which can function as money within a given community. And that creates massive opportunities for those who buy early into a currency that eventually gains an audience and becomes a hit.

What is clear is that the crypto markets are going nowhere. And recent market dynamics have offered important lessons about what makes or doesn’t make sense investing in these spaces, for those moving forward.

Many recent horror stories of crypto investors losing it all involved those buying digital currency on margin, i.e. with borrowed money. When prices fell, they went underwater.

Meanwhile, those who trust Celsius or Voyager also face the possibility of losing everything. So let’s take a closer look at the risks of using some crypto platforms over others.

Celsius and Voyager are what are known as “custodian” platforms. As with traditional banks, investors deposited funds in these digital platforms and thought they could withdraw their money at any time. (Coinbase, Binance and other major crypto exchanges are also custodians.) As Voyager and Celsius have now filed for bankruptcy, account holders have lost access to their money for the time being, although bankruptcy proceedings may eventually result in a refund.

Some crypto enthusiasts directly hold their digital currency without an intermediary platform, quoting a famous, almost cult saying: “Not your keys, not your crypto”. In other words, they hold their own “keys” – which, in the case of bitcoin, is a string of code secured with 256-bit encryption. However, holding your own keys carries other risks. If you lose your keys, you lose your crypto.

According to Upside’s Thorp, one approach to consider is to store your digital currencies in multiple places. “If you’re interested in owning crypto, hold some of it in custody platforms and hold some of it directly, thereby spreading your risk,” he told OZY.

If this approach appeals to you, consider an app like Ember Fund which helps automate buying and diversification between currencies. Ember is not in custody; you hold your own keys. You can also consider applying M1Financewhich performs similar functions but which is a depositary.

If you had $10,000 to put into digital currencies today, which coins would you buy?

Share your thoughts with us at OzyCommunity@Ozy.com.