Source: Bloomberg

As of 22nd January 2022, Bitcoin price was $34,015 and Ethereum at $2,300. This means that a $1,000 investment made at the peak would be worth less than $500 at the moment. This is a massive drop and a heartbreak for cryptocurrency investors. Other cryptocurrencies are not spared - when Bitcoin dips, altcoins fall harder. For example, Solana and Cardano have both been over 20% down in the last 24hours. Meme coins are equally affected; Dogecoin was down over 10% and Shiba Inu declined more than 13%.

Source: Coindesk

It is not only the cryptocurrency market, since other riskier assets are also taking a big hit - NASDAQ and the S&P 500 have suffered losses as well. Cryptocurrencies and technology equities  have been declining at the same time this month, showing an increasing correlation between the two. 

In 2019, China - one of the world’s largest cryptocurrency markets - officially banned trading of cryptocurrency. However, trading continued online through foreign exchanges. In 2021, China’s central bank announced that all cryptocurrency transactions be illegal, and effectively banned digital tokens such as Bitcoin. This created a great negative impact on the cryptocurrency market. Furthermore, there has been concern over the potential for more cryptocurrency regulation in the U.S., as well as how the Federal Reserve (potentially dialling back its monetary policy) would impact the crypto market. The cryptocurrency space is experiencing additional pressure after Russia’s central bank proposed to ban all cryptocurrency operations in the country. According to the central bank, cryptocurrency acts as a threat to financial stability and its monetary policy sovereignty and was one of the biggest blows to the crypto world after China’s ban. Undoubtedly, this negative effect is to be expected since Russia is one of the top three Bitcoin mining countries in the world. Globally, other regulators are focusing on cryptocurrency markets as well. 

For Bitcoin, dip isn’t unusual; cryptocurrencies are volatile and fluctuate from time to time. As rapidly as prices rise, they can tumble back down. For instance, Bitcoin went as high as above $64,000 in April 2021, but three months later, the cryptocurrency had lost more than half its value, diving to below $30,000. Following this, it hit an all-time high at nearly $69,000 in November 2021 and now it has plummeted by more than 50%. Earlier this month, some analysts predicted that the crypto market will go ‘bullish’ and hit $100,000 by May. However, there are recent predictions that show a possible drop below $30,000 and the probability of even hitting $27,000 mark. Whichever way the market goes, there are things you need to know as a trader or investor:

• stay calm

• assess the situation

• remember that volatility is the name of the game

• evaluate the future

• determine how to act

The volatile nature of cryptocurrency attracts traders looking to make a profit but it is nail-biting, especially for new investors. Because of this, it is important to consider if you can actually handle the fluctuation before investing in Bitcoin or any other cryptocurrency. Emotional stability is fundamental; some people rather believe it is safer not to allow your emotion to come into play when trading cryptocurrency. However, humans are humans. Regardless of your tolerance level, it is advisable to only invest the amount of money that you can afford to lose. For cryptocurrency ‘hodlers’ the last two months have been quite the test of endurance.

Source: Cointelegraph

Relevant to this subject, according to the World Bank, there are 1.7 billion people who do not have a bank account and are therefore typically excluded from being able to access basic regulated financial services - such as borrowing, investing and lending. Several reasons exist as to why the unbanked fall foul of higher charges: in order to pay for basic utilities such as electricity and gas, to use cash meters, or to pay for more expensive mobile/cell phone fees by having to resort to pay-as-you-go contracts they are often forced (in order to borrow money) to pay considerably more for their loans by ‘back street lenders’. Whilst most of us are familiar with the challenges of inadequate banking provision in parts of Asia, Latin America or Africa, surprisingly in the US (the world’s biggest economy), 63 million Americans are unbanked or underbanked - an average of $3,000 in annual costs per person. Rationale would suggest that if the proportion of a country’s population who are unbanked can be reduced, then this can not only significantly help the unbanked but can help to increase the GDP of the country as a whole.

The following table shows a summary of the viewers who looked at the above-mentioned LinkedIn post about El Salvador. What is interesting to note is where the LinkedIn viewers are based (i.e. a broad selection of countries) and also the global financial institutions in which the LinkedIn viewers typically work. Could this be an indication that some of the largest financial services companies in the world are looking at the unbanked as a target market? After all, 1.7 billion people (often based in some of the fastest growing countries) could be very profitable and long term for these institutions. Or is this just too cynical?

Summary of viewers of  LinkedIn post about El Salvador.

Source: TeamBlockchain