Cryptocurrencies have become an increasingly popular, but also volatile, investment. And recently, the cryptocurrency sector has experienced a sharp downturn. In fact, in the middle of the year, the entire cryptocurrency market had suffered a 70% decline and had lost more than 2.000 trillion dollars compared to the maximum valuation reached just seven months earlier.
In light of this severe downturn, cryptocurrency enthusiast Mark Cuban had wise words for current and future investors in virtual currencies.
Here's what Mark Cuban said about the cryptocurrency crash
Mark Cuban is the billionaire owner of the Dallas Mavericks and is a well-known investor best known for his role on the TV show Shark Tank. He personally owns cryptocurrencies, including Ether and Ethereum-based non-fungible tokens (NFTs).
When the market downturn began, Cuban commented on the collapse to Fortune, stating, "In stocks and cryptocurrencies, you will see companies that were backed by easy and cheap money disappear, but that did not have viable business prospects."
This does not mean, however, that Cuban believes that all virtual currencies will be equally affected. As he later explained, "As [Warren] Buffett says, 'When the tide goes out, you can see who swims naked'".
In essence, this means that when times get tough, only currencies that have real value will continue to remain viable investments with growth potential. Coins that have no underlying value - in the form of innovative technology or real applications - will likely see their prices drop dramatically and likely not be able to fully recover.
Cuban remains optimistic about the future of cryptocurrency investments
Cuban is not entirely pessimistic about the future of the cryptocurrency market. While he believes that some virtual currencies are likely not going to survive the crisis, he also made it clear that he thinks others will thrive.
"Disruptive applications and technologies released during a bear market, be it stocks or cryptocurrencies or any business, will always find a market and succeed," he said.
He also highlighted the close connection between the cryptocurrency market and the Nasdaq, which is the second largest stock exchange and the exchange on which many leading tech companies list their shares, including Apple, Amazon and Meta (formerly Facebook). Tech companies and cryptocurrencies, especially Bitcoin (quotation live), they tend to have similar performances, as has been the case especially in recent months.
Although the Nasdaq has suffered periodic declines, recoveries have always occurred and the technology stocks listed there have recovered. There is reason to believe that the same will happen to many virtual currencies - especially those that offer something disruptive or are backed by solid technology.
"If rates go up, the currency will struggle until it is priced," Cuban said, referring to the rise in interest rates spurred by the Federal Reserve's efforts to fight inflation. "The exception, as with actions, is new game-changing applications."
All of this means that Cuban probably won't give up its positions in the cryptocurrencies it is invested in - and that it probably wouldn't even advise other cryptocurrency investors to leave the industry. This is especially true for those who, after careful research, are making solid investments that they believe can withstand economic crises and stand the test of time.
