When thinking about cryptocurrency crashes, the expression of wisdom comes to mind on 20/20. Since the peak in November 2021, the market capitalization of cryptocurrencies has been about 70% In value, and crypto investors are in a pinch, no matter how fast they buy.
Investors should be seen as a “lesson of caution” when investing in unregulated assets, said Berena Ross, chair of the European Securities and Markets Authority (ESMA). FT..
“Many of these [crypto assets] Will survive. .. .. I hope some of these investors will see this and at least take careful lessons to think about how much money they will invest in these types of assets. “
Ross noted that the ESMA warned individual investors earlier this year about the serious risks associated with investing in cryptocurrencies. This means that the economic loss of a recession is self-determining.
It has an element of truth, but the problem can be oversimplified for several reasons. For one thing, regulated assets are also on the decline during this period. And the great attraction of digital asset investment lies in its anti-authoritative spirit. This goes beyond short-term price behavior.
Nevertheless, price remains the primary criterion for measuring success or failure, and even the most stubborn crypto proponents will find it painful in portfolio trackers.
To raise awareness about this issue, CryptoSlate contacted people from several industries to find out what lessons they could learn.
Industry leaders share their thoughts on cryptocurrency crashes
Russell StarCEO of Cryptocurrency Exchange Traded Product (ETP) Company courage, Warned that the “get-rich-quick scheme” does not work. He extended this by stating that users should work on more mature crypto investments, especially when performing due diligence.
According to Star, all markets are moving cyclically, and investment strategies based on “optimistic growth forecasts” are “destined to fail” at some point. That’s why recent crashes have keenly realized the importance of recognizing that the crypto market moves cyclically, as well as all markets.
“The recent recession serves as an awakening call to many investors. Its cryptocurrency is as cyclical as all other assets, despite ample runways and room for growth. It is affected by market conditions. “
Star acknowledged that controlling risk acceptance and being content with “realistic sustainable productivity” is an important lesson.
Garry KrugljakowFounder and CEO of GOGO protocol When 0VIXThere was a message similar to the star, saying that the expectation that the market would continue to rise forever was wrong.
Krugljakow also pointed out that rapidly evolving market variables often cannot explain the health of the market, which surprises investors. To embody this with an example, Krugljakow, in the case of DeFi, the available models (for risk assessment and health analysis) often do not assess the user’s “credibility”, which can lead to overexposure. Said there is.
“For example, if we narrow the scope to DeFi, we can see that the soundness and stability of the lending system depends on the collateral value provided by the borrower, although the risk assessment associated with asset price fluctuations has improved. Models often fail, dealing with the ability of users to lend and borrow multiple assets. “
Macroeconomic situation
Listen to investor analysis, Michael RothmerCEO and co-founder DeFiYield“The timing of the market is usually a fruitless effort,” he said.
Reiterating the maxim that past performance does not predict future movements, Rosmer pointed out that, unlike previous cycles, the recent bull market did not end at the top blown away. Therefore, it gives false reassurance to investors who are monitoring this. The lesson here is to set aside deep-rooted market expectations.
“People also believed that we would see the top blown away because it happened in the previous cycle. But the idea is that the market is based on what people expect and prepare. I don’t understand what to do, so in many cases people are unlikely to expect. “
Rosmer commented that it brought about inflation, and investors mistakenly assumed that rising inflation was equivalent to rising asset prices. However, as we are witnessing now, rising inflation has led to hawkish movements from central banks and poor asset price performance.
Rosmer advised investors to pay attention to price euphoria at the end of the tip. This is because we consider it to be a key indicator of an overly hot market. At such times, smart play will lower your risk exposure.
“Reversing the cycle, thinking about risk when the market is falling and rising, reducing risk when the market is rising, learning that there is a risk of falling, high with the general stock market Notice the correlation. “
Bitcoin is a major cryptocurrency for some reason
Bitcoin is generally superior to other Bitcoins, losing about 70% of its value from the highest ever (ATH) in November 2021.In contrast, significant large cap losers include: Solana When Algorand87% and 92% decrease from ATH, respectively.
Regarding lessons to keep in mind, Max Keizer said, “There were no new lessons.” In the sense that investors should have already learned from the previous crash. But he warned that malicious individuals would continue to target “a new generation of naive and greedy suckers.”
For this reason, Keizer does not recommend complex, profitable DeFi products or common alternatives. Instead, the only way to “escape from madness” and protect yourself is to stick to self-managed Bitcoin and Hoddle, Keiser said.
