Are we close to the bottom of the cryptocurrency market?
It’s estimated that over USD 30 trillion of global wealth was wiped from the market this year, of which cryptocurrencies accounted for over USD 2 trillion.
The first half of 2022 saw the worst stock sell-off in half a century. By June, US equities had lost USD 7 trillion in value, and by the middle of September, they were down a further USD 2.2 trillion. On the 26th of September, the S&P closed at its lowest level in 2022, and the Dow Jones officially entered a bear market. Gold hasn’t been spared either as the market witnessed the commodity drop by 10.92% year to date. The US treasury market, seen by many as a safe haven investment, has lost more than 10% of its value this year – resulting in its deepest annual loss and first back-to-back yearly decline since the early 1970s, according to Bloomberg.
Cryptocurrencies have not fared much better, losing over USD 2 trillion in market cap since January. Just this year alone, Bitcoin is down 52.39%, Ethereum is down 58.50% and Jaltech’s Cryptocurrency Basket is down 59% since its inception.
Two questions now remain unanswered, are we at the bottom of the market yet and if not is a further sell-off material for placing new capital into the market?
Warren Buffett’s famous quote should be ringing in the ears of investors - “[investors] should be fearful when others are greedy, and greedy when others are fearful.” Are we coming off a period of greed, and are we headed to (or are already in) a period of fear? If so, could this be close to the bottom of the market? The investment doyen clearly thinks so, having invested USD 50+ billion this year alone.
Market rebound
If history repeats itself, there are three major crashes that we can learn from that have occurred in the last 22 years, the dot-com crash between 2000-2001, the Great Financial Crises of 2008, and the Covid crash in 2020. The below chart summarises the massive drawdowns markets saw during these periods.
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