Since the beginning of the year, the cryptocurrency market has been in full swing. Investor panic is reinforced by the recent FTX scandal.
At the end of November 2021, bitcoin hit an all-time high. It was therefore necessary to pay the astronomical sum of 68,000 dollars to acquire one bitcoin. The cryptocurrency star has ended a bull run of which he has the secret. Since then, the value of bitcoin has continued to decline. In one year, its price was divided by four. It is now around $17,000.
This ice age in the virtual currency market is called the cryptocurrency winter. In this extremely volatile market, winter can therefore last a year… or even more. It is impossible to predict the sequence of events in this particularly unpredictable area. But the immediate outlook is not rosy for bitcoin and the approximately 20,000 cryptocurrencies in circulation.
Investing in cryptocurrencies means exposure to high asset volatility, hacks, scams and unreliable players like FTX.
The FTX Scandal
It must be said that the market is troubled by a large-scale scandal. The FTX platform failure continues to cause big repercussions and discourage crypto-investors. FTX is one of the largest cryptocurrency exchange platforms. Between 10 and 15 billion dollars were traded every day mega exchange for buying and selling virtual currencies.
The problem is that FTX was much less robust than it seemed. Following the rumors of the platform’s bankruptcy, many users wanted to recover their marbles at the same time. FTX could not cope with this “cryptocurrency bank run”. Not having enough money to repay its customers, the platform froze their accounts before filing for bankruptcy. Its founder and CEO Sam Bankman-Fried saw his fortune go from $32 billion to zero in a matter of hours. Of the suspicion of wrongdoing now they weigh on the former boss, who allegedly used his clients’ funds to invest in his own business and to make ultra-risky investments.
Waiting for regulation
The failure of a reputable platform like FTX, which has major interconnections with other players in the cryptocurrency industry, brings to light the defects of a largely deregulated market. While waiting for regulations such as the European MiCA framework, expected for 2024, investors who venture into this market should know that they are poorly protected. Investing in cryptocurrencies means exposing yourself to high asset volatility, hacks, scams and FTX-like unreliable players that are hard to get back. In short, it is risky.
However, risk is precisely what many investors today want to protect themselves from. Since the beginning of the year, the economic instability caused by the war in Ukraine, the energy crisis and runaway inflation have distracted investors from riskier products. This is the case with traditional financial markets. And this is even more true in the ultra-risky cryptocurrency market.
Don’t let the crisis consume all your money. Come to Finance Avenue.
We live in an uncertain economy, so knowing how to grow your money is more important than ever. Not to be missed Finance Avenue 2022the largest silver fair in Belgium to be held on Saturday 3 December at Tour & Taxis in Brussels. You will be able to meet more than 40 exhibitors and benefit from expert advice on investments, real estate investments and retirement and estate planning.