Bitcoin continues to decline in value while the cryptocurrency marketplace faces uncertainty, with Ethereum having dropped to third place by market capitalization.
The cryptocurrency market has recently seen its prices plummet, despite the fact that there are more than 1000 cryptocurrencies currently on the market. This is odd considering the fact that more than 8300 crypto-companies have been set up around the world in 2017 alone.
Cryptocurrencies are digital currencies that are not backed by a central bank. They are used to regulate the generation of units of currency and verify the transfer of funds. When a new cryptocurrency is launched, it enters into a very competitive and volatile marketplace. It competes against many other cryptocurrencies over limited space in the global exchanges and liquidity.
As markets reopened, some of the top cryptocurrencies tumbled- Solana (CRYPTO: SOL), Terra (CRYPTO: LUNA), and Avalanche (CRYPTO: AVAX) declined by 10.6%, 9.1% and 9.7% respectively as of 9:45 ET this morning
CoinDesk experts highlight these three coins because they’re thought of as an alternative to Ethereum. Passing over what some call the SoLunAvax trade, a coin trio that includes (CRYPTO: ETH)
SoLunAvax tokens (SOLVE) has seen ‘several hundred percent’ growth in the past 12 months, with investors originally investing in it as an alternative to Ethereum. Ethereum itself also saw 300% growth over that time period.
One reason the price of these alt-coins might be falling is because Ethereum is getting cheaper. So you’re not really need these “alternative” coins if Ethereum, which you’re using for whatever reasons, drops in price.
How do you spot fake cryptocurrency coins or ICOs that are just a scam?
One of the most important things to do before investing in a cryptocurrency is to research the company behind it. There are many warning signs that can help you spot fake coins or ICOs that are just scams.
1) How long has the company been around?
2) What is their reputation?
3) Who are the team members and what are their credentials? 4) What is their roadmap? 5) What kind of token do they offer and what does it do?
6) Is there an escrow service involved with this ICO?
Next for cryptocurrency
It’s hard to say what the financial market will do in the future. There are many factors that determine its outcome – like crypto exchange rates, economic variables, etc. The best thing you can do is track things over time and make educated guesses with your forecasts based on trend data.
One of the main problems with SoLunAvax is that they are making large sales of crypto on the market. It is estimated that over 800 million dollars in crypto had been sold during the last 24 hours.
And these were no ordinary liquidations, but forced liquidations.
Binance Academy has published an in-depth guide on margin calls. For example, one way stock investors deal with this is to sell off assets at a loss to meet the margin call.Basically, it means that the same traders who have been “liquidating” these hundreds of millions of dollars’ worth of cryptocurrency did so because they bought cryptocurrency on margin (i.e., they took out loans from their brokers), anticipating that bitcoin’s price would rise to an even more stratospheric high–like $50,000 or more. When prices went down instead, their brokers called in their loans, and the traders were forced to sell off assets in order to repay those loans.
I think it’s clear that if CoinDesk is right, we’re starting to see people getting margin called in the crypto space. This trend of falling prices causing more margin calls – well, let’s just say this pattern of prices falling after more margin calls – will continue to happen until something breaks..
If you were unfortunate enough to invest in cryptocurrency on a margin, the best move you can make right now is to sell and cut your losses before it gets any worse..
What the Future Holds for Bitcoin, Ethereum, Other Cryptos and General Advice for Investors
Cryptos are an emerging market that is still in its infancy. It is important to be aware of the risks and rewards associated with cryptocurrencies. Cryptos are a volatile asset class and can be a very risky investment.
Investors should also be aware of the high volatility of this asset class and should only invest what they can afford to lose.
The future for cryptos looks promising, but it will take time before we know for sure what the outcome will be.