Crypto traders are not having a blast, considering current market conditions. Bitcoin has lost more than two thirds of its value since its peak at around $68,000, and is currently trading around $21,000. Ethereum is also trading below an important resistance level at around $1,738. Traders who bought at a high price and held on to their positions are not currently envied by those who stayed on the sidelines. It is rather the opposite. The crypto winter is ongoing amidst the summer heat.
Risk off sentiment weighs down on crypto currencies
There are reasons for both optimism and pessimism about the future of crypto currencies. On one hand, this year has been difficult for different kinds of assets, and not just crypto. A risk-off sentiment has prevailed after the Russian invasion of Ukraine and after the bouts of inflation affecting food and gas prices. This means that once the risk sentiment improves, we might see an improvement in the overall crypto markets.
Crypto assets still must prove their utility
On the other hand, cryptocurrencies remain controversial. Many seasoned investors still have not accepted them as mainstream assets, nor view them as intrinsically valuable. In a sense, those investors have a point. If we really assess crypto currencies based on the value they have offered thus far (besides speculative appeal), then they have provided little value, so why should their price be so high?
Crypto miners are bleeding money
Moreover, mining crypto currencies is energy intensive, and many societies would rather use that energy to heat their homes rather than generate a digital token. Moreover, this mining activity is not necessarily profitable. According to Bloomberg, the losses of crypto miners exceeded $1 billion during the recent market downfall.
The potential for scams is huge
If the above criticism is not enough, perhaps you should consider that crypto tokens are the favorite vehicle for scammers with their pump and dump schemes. They can issue fake tokens to raise funds and get money from others, then dump their price down. They can also use bitcoin and other cryptocurrencies to get paid by the victims of their scams, and extort money from rich targets. Decentralization and anonymity are great features that criminals prefer.
What is next for the crypto markets?
Having all said, crypto instruments can still serve a purpose. They are still good instruments for speculation. Even despite all the negative sides of cryptos, their prices can still rise, even higher than before. After all, the emotions of the masses are not based on logic. You can still trade cryptocurrency CFDs and enter long or short positions depending on your expectations, and still be successful in those markets.
In fact, it is the speculative appeal of crypto that has driven their prices to unprecedented highs, and this can very well happen again if the circumstances allow for it. As a trader, you should be on the lookout for changes in this sentiment.
Summary
Crypto assets are good assets for trading whether you want to buy or sell them. But if essentially you want to buy a share in a business, then you can buy equities or trade equity CFDs. Either way, you should manage your risk carefully to avoid getting caught on the wrong side of the market.