Crypto Op-Ed: Are Altcoin Investors Mentally Prepared to Go Down With the Ship?
There’s no denying, the world is in chaos – more so than ever before.
Debt has been soaring for decades, banks and lenders are overextended, corporations are being crippled due to the lack of cash reserves, and nearly every major market is in turmoil over the impact of the coronavirus.
Not only is the pandemic rapidly claiming the lives of innocent people across the globe, but it’s also causing devastation to their income, job security, savings, retirement funds, and investments.
Few industries are currently safe from the current locked-down environment, and even those that are typically recession-proof are still struggling as the economy tries to stabilize amidst a complete disruption of growth and production.
With incomes dwindling, job losses reaching tens of millions in just two weeks, and assets plummeting in value, it has created a liquidity crisis as investors everywhere seek to sell of any liquid asset into cash in preparation for the coming storm.
The first assets to go, are always the riskiest. And with investors dumping even gold and other precious metals during the current disaster, things are looking bleak for the high-risk asset class of cryptocurrencies.
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Rewind to 2017 during the crypto hype bubble. Unemployment was experiencing the lowest level in years, salaries became bloated as a result of a surging economy, and the stock market surged.
Money was in abundance, and investors had excess to risk in speculative markets like crypto.
Investors flocked to the crypto market after learning about Bitcoin’s meteoric rise from being virtually worthless to $20,000, it was altcoins that they flocked to hoping to strike it rich.
Bitcoin has first-mover advantage, high visibility in branding, and a market cap far larger than the rest fo the market combined. It also features unique attributes that give in unique value, such as its decentralized network and limited supply.
And while it’s difficult to say Bitcoin has a valid use case, it’s potential and being the first of its kind gives it some additional benefits that may help it survive the coming storm
Altcoins, however, are as speculative of an asset as it gets. Outside of the top ten cryptocurrencies by market cap, there’s an endless list of unproven tech with great promise.
But promise doesn’t pay the bills, and these projects could be decades away from ever coming to fruition if they do at all. They very well could be among the first assets to get dumped en masse if the economy gets worse – and it is all but guaranteed at this point.
People are struggling to make rent, feed their families, and are living paycheck to paycheck. Investing more in altcoins is the furthest thing from people’s minds currently.
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Altcoins also offer very little liquidity, meaning that, as investors seek to cash these assets out into fiat to use for bills and spending, or to move into safer investments or even cash, the lack of liquidity could drive the prices of these assets to as close to zero as it gets.
And with these altcoins still down over 90% from an all-time high in many cases, the hope that they’ll ever recoup the losses may be starting to dwindle.
With all that’s going against the crypto market currently, and with possibly the worst economic setback in the history of the modern world, altcoin investors need to mentally prepare themselves to go down with the ship, should things start to sink further.
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