The cryptocurrency market showed some signs of recovery in early 2023, but now it is in dire straits again. Just when you thought the FTX crash might be over, another crisis rocks the cryptocurrency world. Silvergate Capital delayed the submission of its annual report and warned that it could be in financial trouble. This could start another prolonged recession, or you could see it as another chapter in the FTX saga.
So the crypto rally that started in January is taking a break again. Bitcoin (BTC 0.13%) prices have dropped 10% in two weeks and Ethereal (ETH 0.29%) it has lost 8% in the same period. Also, ultra-volatile meme coins are taking even bigger cuts. dogecoin has dropped 14% and Shiba Inu has had a 17% haircut in the same two week span.
In this unpredictable market, many investors wonder if cryptocurrencies will ever see strong long-term growth again.
I am convinced that they will, but the rising waters will not lift all the boats. This crypto winter is also a house cleaning that should differentiate the winners in the long run.
Reform financial systems
The basic premise of crypto investing is simple: digital currencies they are poised to reshape and disrupt the way money is generated, stored and transferred. Many financial functions that require banks and other intermediaries today will move to decentralized systems in the relatively near future.
Many things will change when automated blockchain networks and smart contracts replace human agents and middlemen who want a piece of every transaction. Transactions will be faster and cheaper. Risk assessments will be based on artificial intelligence and machine learning. From banking and insurance to online gambling and gambling, a host of trillion-dollar industries are on the threshold of a new era.
Every step forward is a battle.
The promise of vast improvements also points to radical change, and change can be scary. It's no surprise to see the old guard of financial institutions striving to preserve the world they know and the business they run today. So radical change will take years and each step forward is a battle. Some of the world's largest and most powerful corporations and governments are fighting back.
But even they cannot stop the relentless march of progress. Better financial systems are on the way, whether people like it or not.
And even the biggest crypto bulls would agree that the painful challenges along the way also come with a huge upside. Every technical glitch, fraudulent business practice, and unstable financial platform that is discovered can trigger a crisis in the cryptocurrency industry, but it also draws attention to the problem and a long-term solution.
It's like crafting sound government policy from conservative, liberal, and independent viewpoints through congressional debates and legal challenges. The final policy is stronger thanks to these challenges. The same will happen with the regulatory system for owning, trading and creating cryptocurrencies.
Double up on the classics
Bitcoin and Ethereum have been around for over a decade, but their history as serious financial tools is much shorter. It is still the early days of the blockchain-based business era, and there are probably many more scandals and crises ahead.
Just remember that the latest crisis is not the end of the crypto world, and the next one will be no different.
I'm not very interested in finding the next red hot crypto idea in this environment. For every permanent winner, there are dozens of momentary flashes, bad ideas, and maybe even scams. Instead, this is the time to double down on the tried-and-true giants of the field.
- Bitcoin is the closest thing to digital gold, with an inflation-proof mining mechanism and a grizzled security model.
- Ethereum is the proverbial silver to Bitcoin's gold, with a robust platform for developing the next generation of financial tools and applications.
- As the official blockchain network of the web3 project, Moles (SPOT -0.54%) seems another essential component of this radical change.
Your preferences may differ, and it's always a good idea to check anyone's recommendations with your own research. But these are the three cryptocurrencies that I want to buy every time the cryptocurrency market suffers another sudden downturn. I don't mind skipping Shiba Inu and Dogecoin when Bitcoin, Ethereum and Polkadot are on sale.
Anders Bylund He has positions in Bitcoin, Ethereum, Polkadot, and Silvergate Capital. The Motley Fool has positions and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
