on the crypto
The collapse of FTX made a further dent in the bear market, and the subsequent collapses due to contagion caused the bear market to continue further. Many speculators are wondering if cryptocurrency prices will continue to fall into oblivion or if they will be able to recover.
The bullish hypothesis – the market will recover soon
There are reasons to be optimistic about the state of the markets at the moment, even if many are terrified by the current situation.
The bear market in Bitcoin lasted for about a year, a period typical of previous cycles in the history of bitcoin.
With every exchange that goes bust and every round of Bitcoin that is liquidated, there are fewer possible sellers of Bitcoin – FTX currently has no more BTC to dump on the market.
Furthermore, Bitcoiners continue to steadily accumulate and adoption continues to increase.
The bearish case – oblivion for cryptocurrencies
However, one cannot ignore the scale of FTX's collapse and the potential implications from regulators going forward.
It is very likely that regulators will seek to squash much of what is currently happening in the cryptocurrency space, with rulings such as the SEC's legal victory over LBRY meaning much of the cryptocurrency industry will soon be designated a stock not registered.
This is even more concerning considering that the FTX fallout contagion has not yet ended, with many other companies now struggling to cope with the withdrawals. Genesis, the largest OTC desk in the entire cryptocurrency space for institutions, yesterday halted some withdrawals on its platform as it lacks working capital – it remains to be seen how many other companies and individuals will be affected by this situation and how much this will deteriorate the prices.
DCA may be the best strategy
Rather than trading short or buying the low, the best strategy to mitigate volatility may be to simply build up a position in the markets over time by adopting a cryptocurrency DCA strategy.
Historically, this strategy has worked well to capitalize on Bitcoin's long-term logarithmic growth trend and allowed exposure to the asset class without taking on all of its volatility.
It is highly unlikely that the quotation of Bitcoin falls completely into oblivion, but this will undoubtedly happen to the majority of altcoins currently traded on the market. Speculators should always consider the degree of risk they feel comfortable facing.
