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Experts weigh in on recent selloffs in cryptocurrency market

Should you invest in cryptocurrencies? Experts seem divided on the matter

Bitcoin and cryptocurrency finance concept
Photo (c) Namthip Muanthongthae - Getty Images
In the what goes up must go down world of cryptocurrency, the digital coin market is getting a good grilling over why its most recent fall from grace happened. Is a lack of regulation starting to scare investors? Is the concept of a digital currency too goofy to be viable? Is it bad for the environment?

Coinbase – the largest cryptocurrency exchange by trading volume in the U.S. – sent out an email in January that tried to explain the latest cryptocurrency selloff. It floated theories of its own: from the growing possibility of conflict between Russia and Ukraine fueling global market whiplash to the economy being put on edge by the Federal Reserve’s plan to address inflation rates.

“Nobody can predict the future, and we can’t tell you whether this is a momentary blip or the beginning of a true bear market,” Coinbase stated. is how Coinbase left things

To shed more light on the subject, ConsumerAffairs decided to see what other cryptocurrency market experts had to say about the state of digital currencies.

Experts weigh in on cryptocurrency market

To get a broader view of the situation, ConsumerAffairs asked a group of financial experts to weigh in on Coinbase’s email, focusing on what they would tell a wannabe cryptocurrency investor who is nervous about what’s going on. 

Here’s what they had to say…

The recent plunge might be simply another dip happening before a climb. “The correlations between traditional finance and crypto are not clear yet. We do know traditional markets are a little uneasy right now. There’s a lot of instability with the inflation rate over 7% while growth is at 3%. It wouldn’t be accurate to assume that this doesn’t affect the crypto market,” Ron Levy, CEO and co-founder of The Crypto Company, told ConsumerAffairs.

“The question is exactly how it affects the crypto market. While Bitcoin is significantly down from its peak in November, it is still up 7% for the year. From a traditional standpoint, fluctuations like this are very nerve-wracking. For those that have been in the crypto space for a number of years, we think of it as just another dip on the way to higher highs.”

One cannot invest in the wide array of cryptocurrencies, one can only speculate. “There is no rational way to determine the value of bitcoin or any of the other various cryptocurrencies as one can’t apply the tools of traditional finance to arrive at the intrinsic value (or true value) of the supposed asset. "Investing" in bitcoin and other cryptocurrencies is pure, unadulterated speculation,” commented Robert R. Johnson, Ph.D., CFA, CAIA, and professor of finance at Creighton University.

“I put investing in parentheses because this is not investing, it is speculating. There is no way to value cryptocurrencies other than the greater fool theory -- the hope that some greater fool will pay you more than you paid.” 

Johnson warns investors that cryptocurrency is the consummate bubble and that they should stay far away from it. “Cryptocurrencies are the ‘Tulipmania’ of the 21st century and many market participants are increasingly becoming aware of that reality.”

It’s brought on by the wealthy trying to cover their losses elsewhere in the market. Bob Bilbruck, founder and CEO of B2 Group and Captjur, thinks the cryptocurrency selloff is actually pretty simple. 

“Seventy percent of all cryptocurrencies are owned by the top 1% of the wealthy in the world right now. These people also own a lot of stocks and with all of the down days recently in the stock market these wealthy people are selling their Crypto holdings (some have very big profits in crypto) to cover some of their stock losses,” he said.

“I predict in 3 months we will see a huge rally in crypto's as the fed raises rates and stocks are less attractive - by this time most of these people will be completely moved out of stocks.”

There are better places to put your money. "The critics of crypto blame it to be little more than a casino of virtual assets,” warns Jawad Nayyar, the co-founder and chief vision officer of DAO PropTech. He blames cryptocurrency volatility on investors who put too much stock in digital currencies, calling the situation shaky at best. 

“The price volatility is unlike any other asset class with 50 percent of total value erased within the three months. Lack of intrinsic value resulting in speculative investments is the main reason attributed to this high volatility. Cryptos are little different in this regard to the modern fiat money issued at the whims of the central banks without any asset backing,” Nayyar said.

When ConsumerAffairs asked him where he would tell an investor to put their money, he went straight to real estate. “Real estate assets have been one of the biggest stores of global wealth forever. Current global real estate assets are valued at above $280 trillion (more than 75% of global wealth).”

Cryptocurrencies may mirror the market or only experience a short-term dip.Finder.com's cryptocurrency panel is split on the situation. One half thinks that the current cryptocurrency trend is simply mirroring global financial markets as it has in the past. However, the other half of the panel doesn’t think Bitcoin’s price will drop as interest rates rise. If they do, some think that it’ll only cause a short-term dip in prices.

“Despite a lot of global uncertainty, we expect Bitcoin to peak at $93,717 this year before ending the year at around $76,000,” James Edwards, Finder.com's Cryptocurrency Specialist, told ConsumerAffairs. “Bitcoin remains an appealing store of value and many consumers and institutions take a long-term approach as opposed to day trading which may insulate Bitcoin’s price.”

Edwards cautions investors to stay far away from peripheral cryptocurrencies – what he calls “altcoins” – because he doubts they will fare as well as Bitcoin. “There is a massive sell-off across DeFi tokens in particular, as several flagship projects like Olympus Dao (OHM), Wonderland (TIME), and Magic Internet Money (MIM) are falling apart,” he said, “It is rare for altcoins to survive more than one market cycle, so we are likely to see additional projects collapse as the market continues downwards."

How to survive a cryptocurrency crash

Coinbase reports that there is a way to minimize your cryptocurrency losses (and even make savvy moves) during a falling market. Some of its tips include:

  • Don’t fall prey to FOMO and FUD – “fear of missing out” and “fear, uncertainty, and doubt,” respectively.

  • Set clear goals, diversify, and only trade within your means.

  • HODLing (hold on for dear life) and long-term thinking.

  • Be ready to ride out the dip or take profits.

  • See the opportunities.

“Remember, it’s very easy to get carried away while holding volatile assets like cryptocurrencies,” Coinbase reminds investors. “Trading can be a very high-risk activity, and especially in a bear market, and investors should aim to set goals that balance minimizing potential losses with achieving potential gains.”

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