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With the rising popularity of Bitcoin and other volatile cryptocurrencies, high-risk investors have flocked to the asset class, hoping to profit from the market’s large and abrupt swings. Traders have been riding this roller coaster ride for many years, with the total market capitalization of all cryptocurrencies rising from around $200 billion in 2020 to $3 trillion last year. This year, however, things are looking very different.
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The Web3 market lost around two-thirds of its value in 2022, but despite this catastrophic drawdown from all-time highs, cryptocurrency traders are lapping the heavily discounted prices up. According to blockchain analytics firm Glassnode, investor sentiment surrounding cryptocurrencies has never been more bearish, mentioning that various factors made 2022, particularly the month of June, the worst period ever recorded for the world’s largest cryptocurrency.
Volatility isn’t exclusive to cryptocurrency markets, but digital assets are far more accessible than other risky investments. Volatile markets are the easiest places for novice traders to lose money, and it’s crucial to understand how to trade safely, what makes a risky investment worthwhile, and how to define a project’s value.
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