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As bitcoin and other volatile cryptocurrencies have grown in popularity, high-risk investors have flocked to the asset class, hoping to profit from the market’s wild swings. Traders have been riding this roller coaster for years, with the combined market capitalization of all cryptocurrencies rising from about $200 billion in 2020 to $3 trillion last year. This year, however, things look very different.
The Web3 market has lost roughly two-thirds of its value in 2022, but despite a disastrous pullback from its all-time highs, cryptocurrency traders are still seeing sharply discounted price gains. Investor sentiment around cryptocurrencies has never been more pessimistic, according to blockchain analytics firm Glassnode, citing various factors that make 2022, especially June, the worst time ever for the world’s largest cryptocurrency.
Volatility is not unique to the cryptocurrency market, but digital assets are more accessible than other venture capital investments. Volatile markets are where novice traders are most likely to lose money, and it is critical to understand how to trade safely, the value of venture capital, and how to define project value.
what bears teach us
The cryptocurrency market is considered a largely unregulated space where anything can happen and no one is held accountable. Of course, this is not entirely the case, and governments and financial regulators are always looking for ways to improve the way digital assets are traded. However, this bear market has highlighted some lesser-known risks of cryptocurrency trading, especially those that are easily overlooked by beginner traders.
The ICO boom of 2017 has made the community aware of the dangers of investing in projects without a sound foundation. However, while ICOs have evolved into more vetted ICOs, scams are still rampant in this space.According to a report released by the agency Federal Trade Commissionmore than 46,000 people have claimed to have lost more than $1 billion worth of cryptocurrency to scams since 2021.
From pump-and-dump programs to shady marketing tactics, the lack of generally sound regulation allows scammers to thrive here. However, this isn’t the only way you might lose money. Cryptocurrencies can be particularly volatile, but investing in anything comes with some risk.
a report immunity The loss in the second quarter of 2022 exceeded $670 million, a 52% increase from the loss of $440 million in the second quarter of 2021. Many projects are not exactly scams, but cannot be trusted with your money.Crypto lending bank Celsius was recently spotted flagging customer deposits as unsecured loanunsuspecting users were unable to withdraw funds after Celsius lost client assets in risky trades.
Last year, Crystal Blockchain reported that cryptocurrencies were worth more than Exchange Hackers Lost $4 Billion, many smaller exchanges have failed to implement the security measures expected of a platform hosting so much value. Blockchain technology is envisioned to take back control from financial institutions, preventing any third party from intervening between people and their funds. Trusting an unregulated project like Celsius that brings the concept of centralized banking to cryptocurrencies has its risks, but so does trusting the code.
The recent debacle of the Terra UST algorithmic stablecoin is a serious reminder that while people can be incentivized to act maliciously, smart contracts have no sense of loyalty or morality and can easily be exploited by malicious actors for billions of dollars. The implosion of UST caused a ripple effect across the blockchain space, even putting Three Arrows Capital, the industry’s quintessential venture capital fund, in limbo.
However, the world of cryptocurrencies is not all gloom and doom. Not all exchanges are incompetent, not all crypto banks are fraudulent, and not all code deployed to the blockchain is easily exploitable. Crypto is built on an anarchist agenda, but not all projects voted against regulation. For example, Phemex, a fully regulated cryptocurrency asset management and derivatives platform with more than 5 million customers worldwide, believes regulation may be the only way forward.
Crypto Bull Catching the Horns
Bear markets can be difficult to deal with, especially if you don’t want to cash out. With prices falling, many cryptocurrency investors flock to less risky profit opportunities, while supply is responding to demand. Admittedly, the cryptocurrency market is still largely based on sentiment. Various applications of cryptocurrencies are growing rapidly, but there is still no easy way to link various cryptocurrencies to specific prices, making the asset class extremely sensitive to changes in market sentiment. Furthermore, it is relatively easier for cryptocurrency traders to obtain high levels of leverage. While this allows savvy traders to make huge returns with less capital, when prices drop, it can lead to a market-wide cascading of losses.
During times of volatility, investors must carefully assess market conditions and consider safer investment products. Singapore-based cryptocurrency exchange Phemex Has developed and transformed into a mature financial asset management platform. The company reacted quickly when they noticed that demand was expanding from the niche market of perpetual contract traders to a wider audience looking for a safe and convenient crypto investment option. Phemex’s savings products enable investors to earn interest on their cryptocurrencies through its flexible and fixed savings asset management products. Unlike its competitors, Phemex has taken into account the need for crypto investors to remain nimble. Phemex recently launched a special offer on its Savings product, enabling users to earn yields of up to 18.8% on short-term ETH deposits and up to 4.5% on stablecoins.
Founded by a group of former Morgan Stanley executives to provide users with world-class security, Phemex has grown from a small derivatives trading platform to one of the most popular and acclaimed cryptocurrency exchanges in the world. Unlike Celsius, Phemex guarantees that clients will always have access to their funds, even if the market crashes due to unforeseen circumstances, and even in the recent market crash, they have kept this promise.
Its recent LaunchPool program offers users higher staking income through various types of cryptocurrencies. Users can also cancel their stake at any time and enjoy hourly payments.
Phemex’s LaunchPad product also offers the industry’s hottest upcoming projects, giving investors early access to great projects with exclusive staking benefits without fear of being scammed. While ICOs are typically conducted by anonymous teams with no guarantee of commitment, Phemex reviews every project listed through LaunchPad to ensure the safety of its client funds. In addition, Phemex is now licensed to operate in Turkey, Lithuania and 48 US states. The exchange also recently became a member of the Travel Rule Universal Solutions Technology (TRUST) and is in full compliance with the U.S. travel rule.
There is no one-size-fits-all solution to dealing with a bear market, and due to the negative effects of scams, frauds, and hacks, cryptocurrency investors are looking for the most reliable, low-risk ways to increase their wealth. Perhaps the next bear market bodes well for investors new and old, as well-known projects like Phemex push for sound regulation.
Note: Investing in cryptocurrencies and cryptoassets carries financial risks and readers should conduct their own due diligence. Entrepreneur Media does not endorse any such investment.