In May, when stablecoin TerraUSD crashed and crypto exchange Celsius Network froze withdrawals, the entire crypto market saw devastating losses. Bitcoin dropped to its lowest point since 2020 as investors fled the market.
The market has yet to recover, and it’s unclear whether prices will still drop further. Investors wonder whether their investments will turn a profit, or at least break even, if they just HODL – hold on for dear life – long enough.
In Vancouver, small business owner Jeff Summers invested in crypto assets such as blockchain platforms ethereum and solana. He was initially attracted to crypto because he was interested in decentralized finance and easier international payments.
When the crash happened, he was disappointed. Seeing so much money disappear over just a few days was hard. However, “I always saw crypto as more speculative than many of the stocks that I had already invested in, so I always knew that there was no guarantee with crypto,” he said.
For the moment, Mr. Summers is not interested in buying any more cryptocurrencies, although he’s also not selling off his crypto assets quite yet. He has concerns about what happened with the Celsius platform and the legitimacy of crypto in general. However, he will wait and see what happens; he still thinks crypto has some potential – especially as a reliable way to send money without fees.
Likewise, Eugene Wang, a building services assistant in Toronto, bought ethereum and a few other alternatives to bitcoin. Since the crash, he has tried not to think about his crypto investments. “I had made peace with the risk involved,” he said.
While Mr. Wang doesn’t plan on buying more crypto any time soon, he’s not going to cash out either. “It would be nice if the prices get to a point where I can maybe break even.”
Some investors – especially young ones – see the crash as an opportunity to buy crypto while prices are low (a.k.a. “buying the dip”) in hopes of future returns.
According to cryptocurrency exchange Bitbuy, younger crypto investors were more active on the platform after the crash. At the beginning of the year, ages 18 to 29 represented 4.7 per cent of trading activity. After the crash, that percentage went up to 34.6 per cent.
Venusverse is a female-focused “Web3″ educational program that launched in February. Over that short time, interest in learning about crypto has only increased, according to founder and chief executive Janelle Chalouhi. (Web3 is a buzzword for a more decentralized wave of the internet.) The organization’s Web3 and cryptocurrency education sessions are fully booked despite the crypto downturn. “We don’t know if we’ve hit bottom quite yet,” she said about crypto prices. “But it is an opportunity to start exploring what crypto can do.”
Not all investors are optimistic about the future of crypto. A visit to Reddit message boards reveals mixed reactions and uncertainty about the future.
Users posted skeptical reactions to an article on the r/cryptocurrency message board about claims the worst of the crash was already over. Among the responses, user Dogchap said, “Just when someone says the worst is over in the financial market, assume the opposite.”
According to the user PENGUINSflyGOOD, there are no certainties when it comes to crypto, an experimental, relatively new asset class. “Being able to accept it all going to 0 is part of investing in it,” they wrote on a thread entitled “Please help me understand your certainty in crypto’s future.”
Indeed, there’s no playbook for crypto investing; while the stock market, too, has its risks, investors there have decades of data to draw on.
For those crypto investors considering buying the dip, the critical thing they need to understand is that crypto is a very high-risk asset class and that there’s no such thing as a risk-free return, said Ryan Clements, a fintech expert at the University of Calgary.
Furthermore, there’s no guarantee that crypto prices will recover. “Coins that purport to be “stable” can (and do) fail, and we have now clearly seen this in the case of Terra,” Dr. Clements said.
He said that investors need to do thorough research, talk to an investment professional and determine how much risk they can tolerate. Before investing in any crypto asset, or lending platform, investors need to understand the specific risks.
He also says it’s essential to take a close and critical look at any promises that seem too good to be true.
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