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Are We on the Brink of a Crypto Crash?

As cryptocurrency went mainstream this past year, it took investors to the moon. Bitcoin saw record highs, and even Dogecoin has had its time to shine. During all of this heightened success, economists and retail investors alike were wondering how long the success could last. Now, there are whispers of the crypto market facing a crash. Has this happened before? Will it happen again? Or are these warnings meant to drive people away, creating a dip in the price? Stranger things have happened.

Why do people think the crypto bubble will soon burst?

Bitcoin’s all-time high is $63,000, a price it reached in April 2021. But at this point, it’s sitting around $30,000. Experts believe a number of circumstances led to this dip, including China’s crypto crackdown. 

On June 20, the “Big Short” investor (and early believer in GameStop stock potential) Michael Burry predicted that “the mother of all crashes” is coming soon to crypto. He believes that all of the “hype” has been coordinated to entice retail investors to jump in, citing “FOMO” as the main driving force.

“The problem with #Crypto, as in most things, is the leverage. If you don’t know how much leverage is in crypto, you don’t know anything about crypto.”

Michael Burry, Twitter

Some people are holding out for the long-term gains.

But some investors believe you still can have long-term success with crypto investments. YahooFinance reported that Bandwidth Technologies International Group (BTIG) strategist Julian Emanuel sent a positive note to his clients, saying his company “see[s] the long-term case for digital assets.” He’s standing firm on end-of-year crypto price forecasts, including $50,000 for Bitcoin and $5,000 for Ether. 

“[We] would take advantage of the present weakness to add to core holdings,” he said. 

Cryptocurrency volatility

Why do people say crypto is volatile? MarketWatch shared data from Dow Jones Market Data showing that over the past 11 years, Bitcoin has seen more than 750 times when prices saw a daily change of 5% or greater and almost 50 times that it’s changed by at least 20%. Investors may always fear that the next dip could be “the one.”

chart showing price changes in bitcoin, s&p 500, and gold since 1984
By Dow Jones Market Data / Via MarketWatch

Crypto crash 2018

When did crypto crash last? In 2018, digital currencies went from a record high in January to an 80% dip. The Financial Post noted this was worse than the 2000 “dot-com bubble burst.” After this crash, Neil Wilson, a chief market analyst in London for Markets.com, told the outlet, “It just shows what a massive, speculative bubble the whole crypto thing was.”

Should we buy or sell?

Well, are we nearly in the same boat as we were in 2018, just a much larger one with more people? Really, no one knows. Some investors say volatility is the name of the game, so only invest as much as you’re willing to lose. Others say long-term investing is the way to go, and cryptocurrency will eventually head toward the moon again. What do you think? Are you bullish or bearish on the crypto market?

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