Cryptocurrency investors and market watchers have been taken on a wild ride this month. Crypto assets are down across the board, with Bitcoin shedding nearly 50% of its value in May alone.
These fresh losses have spooked many investors and turned others off from cryptocurrencies altogether. However, it may be too soon to write off crypto assets completely.
Like any new technology or asset class, Bitcoin and altcoins prices have been highly unpredictable. While this has meant windfall profits for some early investors, this volatility has left others high and dry.
Fortunately, there are other ways to indirectly gain exposure to the crypto market without holding coins or tokens.
Investors with slightly lower risk tolerances than maverick crypto investors have been putting money into crypto exchange stocks. While not totally shielded from wild crypto market swings, these exchange stocks offer the potential for solid returns with considerably less risk.
Catalyx Exchange, a TechX Technologies Inc. (CSE: TECX) (OTC: TECXF) (FRA: C0B1) portfolio company, has witnessed significant growth in trading volume, revenue, transactions and average daily users during the same period that most cryptocurrencies and altcoins prices were plummeting.
May wasn’t all bad for crypto market players. Catalyx Exchange has quickly solidified its place as Canada’s premiere cryptocurrency exchange, offering users access to a low-fee platform for crypto trading, blockchain and cybersecurity technology. The Canadian-based exchange is FINTRAC registered and complaint.
Reporting on key metrics from May 2021, the company experienced:
Commenting on the company’s explosive month, Catalyx CEO Jae Park provided thoughts on what could have helped fuel their record growth:
“Instead of turning investors away, the reduced crypto prices created an attractive buying opportunity that clearly enticed more users to trade even more as the market became more volatile. It’s very encouraging to see Catalyx not only overcome, but thrive during market downturns.”
Crypto markets, in general, are not of the faint of heart; this volatile asset class is prone to boom and bust cycles. We saw it happen in 2018, and we are seeing it again right now. However, with wider mainstream acceptance, it appears that as an asset class, cryptocurrency is here to stay. For long-term investors, all these bumps in the road are just a part of the ride.
After a couple of years of relative quiet, growing interest in Bitcoin caused prices to soar, coming close to doubling in value between December 2020 and January 2021. Later, in February, Tesla CEO Elon Musk added to the buying frenzy when it was announced that Tesla (TSLA) had purchased 1.5 billion in Bitcoin and would accept the cryptocurrency as a payment method.
Amateur investors that had mostly been watching the meteoric rise of cryptocurrencies from the sidelines began to take notice. In the first three months of 2021, popular trading app Robinhood saw active users on its platform increase from 1.7 million in Q4 to 9.5 million, while Coinbase its number of active users double in Q1 to 6.1 million.
Between February and April, the price of Bitcoin climbed, reaching a new all-time high of $ 64,829.14 as retail and institutional investors continued to buy into the cryptocurrency.
And the buying frenzy wasn’t limited to Bitcoin. Other altcoins, such as Ethereum and Dogecoin, also saw prices soar, both hitting new all-time highs in May.
Then came the crypto market crash. In a moment that many investors will remember for a long time, a single tweet from Elon Musk stating that Tesla would no longer be accepting Bitcoin as payment sent crypto prices off a cliff. The sell-off was further exacerbated when China announced new cryptocurrency transaction restrictions. Ultimately over $410 billion was wiped from Bitcoins market value in a few short weeks.
The question on everyone’s mind is, what happens now? Was this latest crypto crash just another example of crypto price volatility, or was it a sign that something deeper is amiss?
Where the crypto market is going is anyone’s guess. May’s Bitcoin price plunge can be partially explained by over-hyped buying pressure, similar to other boom and bust cycles seen throughout 2017 and 2018, and continued price volatility might just be something the investors need to accept for the time being.
Investors seeking to profit from the crypto market over the short and long term should be looking at other key metrics when evaluating cryptos. And an important one to watch is adoption rate. By this metric, people are adopting Bitcoin and cryptos faster than any other technological advancement in recent history – including the internet.
It seems logical to conclude that as more people embrace crypto technology, the crypto market’s value will rise.
Bitcoin and other cryptos also offer investors a potential hedge against inflation, with some comparing it to gold as a safe-haven investment. And with economies worldwide reaching fever pitch, overheating is a real concern. Institutional investors have been buying Bitcoin at rates unseen before. For the first time, more Bitcoin is being bought than is being mined, which could put upward price pressure on the cryptocurrency as demand outstrips supply.
Looking ahead, the crypto market may have reached a point where relative price stability is not too far off, but investors should not be holding their breath.
Over the past 30 days, there has been little significant positive price movement in the crypto market, which could signal higher prices are coming. With summertime being historically quiet, it will be interesting to see what happens over the next few months.
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