The cryptocurrency market faced a major bearish trend in the last week, resulting in over billions of money in liquidations and sending jitters across investors. Priya Kumar is a blockchain investor and analyst, known for her often bold opinions about the crypto landscape. She explains what went wrong with the market leading up to the crash and provides possible recovery predictions for Bitcoin and other altcoins severely impacted. Priya draws upon her utility token, launchpad ecosystem, and DeFi creation finesse. Read the interview below to hear her actionable advice for investors as they continue through this unpredictable quarter.

Understanding the Crypto Market Crash

The latest downturn in the crypto market was caused by a combination of factors that made for a perfect storm of selling pressure. This called into question the future of the pact as a public disagreement erupted between US President Donald Trump and billionaire space entrepreneur Elon Musk. This confrontation perhaps helped to incite the broader market selloff. When high-profile events like this happen, it can sometimes rattle investor confidence, causing a domino effect across the entire crypto landscape.

The numbers tell a stark story: over $980 million in crypto futures were liquidated, with a staggering $874 million in long positions wiped out. This is the largest single day liquidation since February 25. It reflects a major spike in selling activity as traders rushed to cut their losses and get out of their trades. A crash, like Priya’s, usually features sharper drops of 20% or greater, driven by panic, contagion or sudden shocks. The market’s subsequent drop came after falling below a multi-week support line at about the $3.25 trillion mark, compounding things even further.

Outside of the major catalysts, nothing acts as a trigger for these crashes more than the crypto market’s natural volatility. Unlike other financial markets, the crypto market never closes. It is highly unregulated and much more subject to the whims of social media sentiment. This perilous combination can create extreme price volatility and greater likelihood of liquidation, particularly for the highly leveraged.

Historical Bitcoin Crashes and Recoveries

To develop the best sense of Bitcoin’s future path, look at past crashes. 3) Add to the above a look at how the larger crypto market has rebounded from these events. Bitcoin’s past, characterized by meteoric spikes resulting in catastrophic corrections, has a history of offering myriad lessons.

  • 2013: Bitcoin price saw a first major spike, from $13.00 at the beginning of the year to nearly $250 in April, and then cooled off, before experiencing another rapid appreciation to over $1,100 in December. This volatility demonstrated the potential for explosive growth and the risk of sharp corrections.
  • 2016: Bitcoin price slowly climbed to over $900 by the end of the year, with $10,000 being a critical level that was finally broken in October. This period of steady growth laid the foundation for the subsequent bull run.
  • 2017: Bitcoin's price hovered around $1,000 until it broke $2,000 in mid-May and then skyrocketed to close at $19,188 on Dec. 16. This parabolic rise was followed by a significant crash, highlighting the unsustainable nature of exponential growth.
  • 2018: Bitcoin closed at $3,693 – more than $10,000 down from where it ended the previous year. This bear market tested the resolve of many investors and demonstrated the importance of long-term perspective.
  • 2020: The pandemic shutdown and subsequent government policies accelerated Bitcoin's rise, with the price opening the year at $7,161 and reaching new all-time highs. This period showed how external events can significantly impact the crypto market.

After every crash, there has been a recovery, usually led by more interest, better technology and greater adoption. Disclaimer: Previous performance is not indicative of future results. Yet examining these cycles provides important perspective on market trends and potential paths to recovery.

Altcoins to Watch

Here are three altcoins to watch despite the recent market bloodbath that could make big comebacks and help you recover some losses. Priya Kumar highlights a few notable examples:

  • Non-Playable Coin (NPC): Currently trading at $0.014, with a potential for growth despite a 14% drop in the last 24 hours. Its resilience and underlying technology make it a project to watch.
  • Solaxy (SOLX): Raised $48.2 million in its presale, with a potential for 10x returns if it revisits previous highs. The strong presale indicates significant investor interest.
  • Bitcoin Hyper (HYPER): Reached a $1 million milestone in its presale, offering an impressive 645% APY staking reward and significant growth potential. The high APY is designed to attract and retain investors.
  • Ethereum (ETH): Historically performs well near the peak of the cycle, with a surge to $2,700 signaling capital rotation into alternative cryptocurrencies. As the leading altcoin, Ethereum often benefits from capital flowing out of Bitcoin.

These altcoins make up a broad and diverse ecosystem of projects, each with unique innovation, value proposition, and potential for growth. Conclusion Investors need to do their homework before jumping into altcoins. Be particularly careful, as these types of digital currencies are often much more volatile than Bitcoin.

Risk Management Strategies for Volatile Times

Sound risk management is paramount when trading in today’s unpredictable crypto market. Priya Kumar shares critical lessons about the need for diversification, risk assessment, and risk mitigation strategies to safeguard investments in adverse market conditions.

  • Diversification: Spread investments across different asset classes, sectors, and geographic regions to minimize exposure to any one particular market or sector.

    • Asset Allocation: Allocate investments among different asset classes, such as stocks, bonds, real estate, and cryptocurrencies, based on risk tolerance and investment goals.
    • Sector Diversification: Diversify investments within each asset class by investing in different sectors or industries. For example, within the cryptocurrency asset class, invest in different types of cryptocurrencies, such as Bitcoin, Ethereum, and altcoins.
    • Geographic Diversification: Spread investments across different geographic regions to reduce exposure to any one particular country or region.

  • Risk Assessment: Identify, assess, and prioritize potential risks to determine the likelihood and potential impact of each risk.

    • Identifying Risks: Identify potential risks that could negatively impact investments, such as market volatility, regulatory changes, security breaches, and technological obsolescence.
    • Assessing Risks: Assess the likelihood and potential impact of each risk. This involves analyzing historical data, conducting market research, and consulting with experts.
    • Prioritizing Risks: Prioritize risks based on their likelihood and potential impact. Focus on mitigating the risks that are most likely to occur and have the greatest potential impact.

  • Risk Mitigation: Implement strategies to mitigate potential risks, such as employee training, advanced security technologies, regular audits and updates, and having an incident response plan.

    • Stop-Loss Orders: Stop-loss orders help limit losses by automatically selling a security when it falls to a certain price, preventing further losses.
    • Hedging: Use hedging strategies to offset potential losses in one investment by taking a position in another investment that is expected to move in the opposite direction.
    • Insurance: Purchase insurance to protect against potential losses from certain risks, such as theft or security breaches.

  • Risk Monitoring: Continuously monitor and assess risks to ensure that risk management strategies are effective and up-to-date.

    • Regular Reviews: Regularly review risk management strategies to ensure that they are still effective and appropriate for the current market conditions.
    • Performance Monitoring: Monitor the performance of investments to identify any potential risks or red flags.
    • Incident Response: Have an incident response plan in place to address any unexpected events or crises that could impact investments.

  • Risk Avoidance: Avoid investments that are highly correlated or have a high risk of loss during volatile periods.

    • Due Diligence: Conduct thorough due diligence on any investment before investing to assess its risks and potential rewards.
    • Avoid Over-Leverage: Avoid using excessive leverage, as it can amplify both gains and losses.
    • Stay Informed: Stay informed about market trends and developments to make informed investment decisions.

By implementing these risk management strategies, investors can better protect their investments and navigate the volatile crypto market with greater confidence.

Conclusion

This week’s crypto market bloodbath is an unfortunate reminder of the inherent and significant risks of this emerging asset class. It underscores just how volatile it is. At the same time, it gives well-informed investors a chance to take advantage of market dislocations and array themselves to participate in future growth. Learning from what causes markets to crash is an important lesson for investors. By understanding past boom and bust cycles and putting proper risk management protocols in place, they can make sure their crypto journey stems toward success rather than loss. Priya Kumar’s perspectives offer an indispensable framework to understand the market and make smart decisions with conviction amidst this upheaval.