The cryptocurrency market capitalization (current total dollar market value of crypto) returned to the $1 trillion milestone in July, after falling below that threshold in previous months. The market may be in better shape now than it was a few weeks ago, but it’s still much below its all-time high of $3 trillion hit in November of last year. Is cryptocurrency still a good investment in light of the rising inflation and possible recession in the near future?
After hitting lofty highs in 2021, cryptocurrency has slid to new lows this year, plunging into a bear market that some market observers are calling a “crypto winter.” Once-familiar digital currencies like the crypto token luna were completely destroyed with the collapse of stablecoin terraUSD in May, which led to the loss of $2 trillion in investor wealth and the loss of employment for thousands of workers.
Even though the cryptocurrency market is showing signs of improvement, it is no stranger to wild price swings, and doubters have for a long time cast crypto as a bubble doomed to explode. Bitcoin, stablecoins, and NFTs have all been criticized for being nothing more than a modernized form of an old con. Digital currency, on the other hand, is seen as a progressive development by financiers, a “Money 2.0” that will open up banking and fuel the virtual world. Cryptocurrency is still controversial, hazardous, and wildly volatile, despite the fact that prices and emotions have been all over the place.
Cryptocurrency, in its simplest form, is a digital token whose ownership is recorded on a blockchain, a decentralized and immutable software ledger. This should, in principle, make it safer to use. More than 18,000 tokens are exchanged under numerous names, with bitcoin and ethereum being the most well-known (dogecoin is one famous example).
Cryptocurrency is considered by many as the next financial frontier despite price volatility and a lack of regulation. Government and business institutions are increasingly eager to fast legitimate crypto in the same way as equities and bonds, as seen by developments such as President Joe Biden’s intention to investigate a digital US currency and multimillion-dollar Super Bowl advertising.
However, given the current dip and the ever-present possibility of a catastrophic crash, you may want to think twice about whether bitcoin is a good investment for you (in crypto and the US economy, generally).
According to Gerri Walsh, senior vice president of investor education at the Financial Industry Regulatory Authority, “Cryptocurrency is one of those categories of investing that doesn’t have those usual investor safeguards.” “They are not considered to be part of the stock market. It’s a grey area as far as rules are concerned.”
Cryptocurrencies, which offer few protections, many hazards, and a mixed track record, have prompted experts to warn investors not to put more money into them than they can afford to lose.
