Most of the cryptocurrency investors is aware of the recent market crash. The decline was dramatic: the total value of the cryptocurrency market dropped from nearly $ 3.000 trillion at its peak to just under $ 1.000 trillion.
The market has already been volatile in the past, but some investors think it's different this time around.
One such investor is Graham Stephan, a YouTube character and real estate agent who often talks about saving and wealth creation. Stephan recently logged on to Twitter to share his thoughts on the crash and his projections about the future of the cryptocurrency industry.
Here's what Graham Stephan has to say about the recent cryptocurrency crash
Stephan began his Twitter post by clarifying that he has long been a fan of cryptocurrencies and that he has had a personal stake in virtual currencies since 2017. However, while stating that he has already witnessed large price swings and acknowledging that "the ups and downs they are part of the market, ”he believes this big crash is completely different and is just the“ tip of the iceberg ”.
Stephan warned that "irresponsible management and leverage have led to a cryptocurrency crisis," which he believes is not likely to subside anytime soon for two main reasons.
The first problem Stephan identified is that cryptocurrency platforms were largely unregulated and took advantage of this lack of oversight to borrow against client funds, which they then used as collateral to take out other loans.
As a result, some platforms were so supercharged that when customers started selling in a panic during the crisis, they had to freeze their withdrawals. Stephan blamed this phenomenon for the collapse of Celsius, Voyager and 3AC.
The second problem highlighted by Stephan is that of "unforced errors", including Celcius who hides hacks and accidentally returns millions of dollars worth of tokens and Voyager who grants large loans to 3AC without adequate guarantees.
Stephan's warning is important and investors should heed it. It touches upon some of the same issues mentioned by billionaire Mark Cuban, who commented on the recent cryptocurrency crash by stating that companies without a solid business model risk disappearing permanently during the crisis because, as [Warren] Buffett puts it, “when the tide turns withdraw, you can see who swims naked ”.
What does Stephan think you should do to protect your money?
In light of the fundamental problems of crypto platforms that Stephan points out, investors who are still interested in this asset class may be wondering what to do to protect their funds while buying virtual currencies.
Stephan offered some advice in this regard as well. Specifically, he provided four suggestions, including: beware of user-level scams; move their long-term cryptocurrency holdings to cold storage; use multiple different platforms to make investments in cryptocurrencies; make sure you don't invest more money than you can afford to lose if things go wrong.
These are sound advice, especially with regards to the warning not to invest money you are counting on. Even finance pundits like Suze Orman have warned against investing in cryptocurrencies with money you can't afford to lose.
Regardless of whether Stephan is right about the underlying issues that will lead to continuing problems in the cryptocurrency industry, it is vital to keep in mind that the lack of regulatory oversight and the high volatility of this untested asset class make cryptocurrencies an investment. more dangerous than many others. This does not mean that you should leave the sector, but that you need to be cautious and make sure you invest in traditional assets that have been consolidated over time.