Is Bitcoin Dying? Key Takeaways from This Year’s Massive Crypto CorrectionAs of July 2nd, over 800 cryptocurrencies were valued at less than one cent, making them effectively dead. As of the writing of this article, Bitcoin, the original flagship cryptocurrency, was sitting at 70% below its peak price.
Although the notoriously volatile currency may have spiked back up by the time you read this, a lot of people have had their confidence in the revolutionary digital money shattered by the correction.
Bitcoin isn’t dead just yet, but here are some lessons to be learned for people still interested in cryptocurrencies.
1. Choose Your Exchanges WiselyThe coin exchanges through which people trade cryptocurrencies have become popular targets for hackers, who are able to steal huge troves of data if they breach the exchanges’ defenses. South Korea’s Bithumb was the victim of a brutal $30 million hack in 2018, which saw increased regulations from the Korean government as a result.
This isn’t new: Mt. Gox was one of the largest crypto exchanges in the world before it was hacked in 2014. Investors are advised to choose exchanges with verified, stringent security protocols to avoid losing their hard-earned coins.
2. Avoid Sketchy ICOsMany of the 800 coins that have seen their value dwindle to nothing were the product of initial coin offerings. ICOs, as they’re known, are a new way of funding start-ups.
Rather than purchasing equity in the company-to-be, as is the case with traditional venture capital funding, investors buy in to a cryptocurrency created by the start-up that they can exchange for its products in the future, or sell when its value increases.
Companies were able to raise $3.8 billion from ICOs in 2017; that amount has tripled in 2018. But many of these ICOs were either poorly planned out or downright scams. When the associated startups failed to, you know, actually start up, their value cratered. The lesson? Don’t buy into new crypto tokens unless the associated company can prove they mean business.
3. Start Looking at Crypto More Like Other InvestmentsIt may be time to heed the warning of cryptocurrency naysayers, at least in some cases. The biggest knock against Bitcoin from finance traditionalists has always been its supposed lack of concrete value. Although the truth of that is still up for debate, the correction should prompt investors to consider that these crypto skeptics might have some insight into how to proceed. “At the end of the day, cryptoassets are just like every other asset,” notes Cornell professor Emin Gün Sirer.
He recommends that you only buy into a cryptocurrency if you can foresee a situation where someone will “desperately want to acquire this coin in the future.” That means focusing on coins with more concrete applications, like Ethereum, which is leading the way in creative applications of blockchain technology.
Coins whose value is based largely on name recognition ought to be avoided.
The great crypto correction (don’t call it a crash) of 2018 has wiped out millions in value from the digital wallets of investors across the globe. If you’d like to avoid being a victim of the next correction, take the lessons above to heart.