As crypto price volatility escalates, sections of analysts have their fingers crossed that the scenario will go back to the upward trajectory, which is bound to flush out any weak hands. 

The war in the crypto market that is presently flooding the cryptosphere will probably be remembered as one of the principal factors to remember notwithstanding trends indicating prices recovering, or continuing their downward trajectory. 

For those of you in the dark, the crypto market crashed following a week of news that didn’t bode well for it; Tesla CEO Elon Musk and the Chinese State threw spanners into the operations of cryptocurrency miners, pushing Bitcoin (BTC) down to 30,000 US$. This signified the biggest ever monthly decline in the worth of BTC is monetary terms as it has almost dropped in value by 50%, in stark contrast to the all-time highs of 64,000 US$. Bitcoin and altcoins have a symbiotic relationship, and this was reflected in their state as well. 

Large liquidations have taken place across the board, to the extent that the cumulative market capitalization of the crypto market has gone down from 2.5 Trillion US$+ to merely under 1.5 Trillion US$ since May 12, therefore displaying a decrease of nearly 6/10ths.  

Galaxy Digital Founder Mike Novogratz gave his opinion on the present scenario in the market, opining that as Bitcoin experiences a high degree of volatility on an ongoing basis, as a consequence reaching its bottom, it appears as if it will take this still developing market a considerable amount of time to consolidate and stabilize. 

Cumulatively, in terms of what’s fueling the previously mentioned market volatility, there appears to be a plethora of aspects in force. To begin with, crypto prime broker Genesis Global Trading observed that as of late, several leading Bitcoin sell-offs were observed, thanks, mostly due to forced liquidations and leveraged closeouts. 

Further, the recent price decreases can possibly also be ascribed to investors migrating their investments following updates that the Chinese State had seemingly banned its citizens from obtaining access to any crypto exchanges and from engaging in transactions with digital currencies. 

What to think of the volatility? 

What’s taking place in the crypto market, and where might the cryptosphere in its totality be looking at in the near future to mid-term? COO of bitFlyer, Joel Edgerton shared his belief that an assortment of negative assessments, like Musk going bearish on BTC, Binance potentially looking at regulatory penalties from the U.S.A., tax season selling, etc. – have flooded the cryptosphere and have created mass panic, specifically amongst retail traders. 

He further opined that the breakdown had been amplified by the high leverage utilized in unregulated exchanges. “Buying into the drops is like catching a falling knife”, he quipped. This shifts the buyers to the sidelines in anticipation of a bottom. He was of the opinion that the need of the hour is to identify a bottom and consolidate the price prior to any stability being observed. 

Jack Lu, CEO of Wanchain, highlighted that with the digital asset market having appreciated at a steady pace over the last half-a-year, it appeared as if it was only a question of time that such a correction would take place. His thinking was along the lines that once the industry has the capability to navigate this new round of monetary uncertainty, it will “regain all of its lost value and attain new highs this bull cycle.” 

Konstantin Anissimov, executive director of crypto exchange CEX.IO, is of the belief that while the reasons for this new dip may be several, the market is showing an incredible level of maturity to actively shrug off any pending bearish volatility – something that was not found in previous bull runs. 

China holds somewhat of a mining dominance and the cryptosphere as a whole is looking to unwind from this. Meanwhile, retail investors are decoupling from the aftermath of Elon Musk’s social media posts, all in an effort to allow the free reaction of the market to the hoard of fundamental events that show up all the time. 

Will the market experience ongoing growth, in line with expectations? 

Another topic worth investigating, particularly considering the recent market crash, is if or not the cryptosphere will have the capability for expansion as it has during the previous 12-months. On the topic, Lu stated that the decentralized finance market has gained a noteworthy degree of traction lately, with this segment’s cumulative value locked and the number of applications appreciating considerably. 

Further, he also brought into focus that with an increasing number of blockchain interoperability solutions now finding their way into this situation, it appears as if the decentralized finance market will experience ongoing growth and garner the interest of many new investors all over the world. 

In addition to the DeFi sector, the crypto market has also conceived the nonfungible token boom, which in the opinion of several analysts is a space that appears poised to evolve and continue expanding in the coming times, particularly as an increasing number of artists, musicians, and content creators continue to adapt to these unique digital offerings. 

Finally, it should also be noted that the use cases for blockchain are not just restricted to crypto, as recently, several nation-states including the Bahamas, Cambodia, and China have all ran tests or launched their proprietary central bank-backed digital currencies. Hence, the cryptosphere is rapidly evolving beyond being a tool for speculative investment, as the vast majority of tokens are not capable of being characterized as currencies or investment vehicles, and instead, should be utility tokens of several functions or collectibles. 

Why fear volatility? 

Daniel Peled, co-founder, and President of Orbs, opines that the prevailing downward trend is in line with what was observed during historical bull runs, where there were also noteworthy downturns in the shorter term. 

There might be extra bearish pressure over the short term, partially due to the incoming negative press and hype, over the longer term, this will also rectify itself. The ideal way to insulate yourself from this phenomenon is to stay with consistent, rational strategies like monthly dollar-cost averaging. 

He then went on that investors should take into account the fact that the cryptosphere has always experienced some degree of volatility, and its critical to consider other fundamental indicators other than merely the price of a crypto asset to rationalize the market. On the basis of dominant fundamentals, which includes the rate of adoption of BTC, the continuous innovation in the Ethereum ecosystem, hash rate, and inflows vs outflows, we are still, very much living in a bull market. 

Kevin Liu, co-founder of MetisDAO – a layer-two decentralized autonomous organization protocol, shared that much like the current volatility, the bull run of 2017 also witnessed multiple big corrections followed by 3-digit run-ups, essentially indicating that what’s taking place right now – isn’t anything abnormal. 

Therefore, in the midst of chaos, it is reasonable to rationalize that the present volatility is a natural consequence of large price moves. Maintaining composure could protect investors from making a bad choice. Hence, it is ideal if individuals take decisions that are educated, on the basis of technical/fundamental information over reactionary actions to hearsay and soundbites.