The cryptocurrency market has crashed, with the price of bitcoin falling 67% from its all-time high in November last year.
On Wall Street they have been getting rid of the riskiest investments, such as cryptocurrencies, at a time when the shadow of a possible recession in the United States has moved large capitals to seek refuge in more stable assets.
With rampant inflation sweeping the globe, a spike in interest rates and a global economic slowdown which has been fueled by the war in Ukraine, the market is going through a so-called “crypto winter”, i.e. a prolonged period of low prices for digital currencies.
To add fuel to the fire, projects to regulate the sector are being debated in the United States -something that affects expectations about the price of cryptocurrencies-, while they appear with more and more often fraud and non-transparent business that have gone bankrupt.
One of the cases that has caused the greatest impact in recent months has been the collapse of the Luna digital currency that left hundreds of people on the street who bet their money in search of great profitability, and in the end they watched helplessly how faded before his eyes.
For Edward Moya, a senior market analyst at the consulting firm Oanda, the gigantic rise in inflation has played a key role in the drop in prices.
“Cryptocurrencies plummeted after persistent inflation triggered a wave of aggressive adjustments by central banks that led risk assets to fall sharply,” he tells BBC Mundo.
The desperate response of large institutional investors who move huge amounts of capital also played a role.
“Panic selling accelerated cryptocurrency downturn after all the institutional money that entered the cryptocurrency space in 2021 saw their investments cut,” Moya argues.
With all the wind against it, there are “crypto devotees” or “crypto evangelists” who are convinced that the current collapse -particularly of bitcoin- is part of one of the cycles of ups and downs that have been present since the digital currency came to the fore. market in 2009.
“We are not selling”
His key argument is that in the long run, one bitcoin will be worth hundreds of thousands of dollars, which is why this bearish cycle is just one part of the big rally.
Let the current price of bitcoin be less than a third than it was worth just a few months ago is not a sign that the bubble has burst, they say.
They are the ones who tell whoever wants to listen: we are not selling (“we are not selling”)as if it were a war cry.
As a brotherhood that wants to encourage its members to resist, when asked what to do with bitcoins, they respond with a resounding: “HODL” (which in cryptonian jargon is a way of saying “hold”, that is, hold or maintain .
The term “HODL”, always capitalized on social networks, apparently had its origin in a Bitcointalk forum, when a user wrote “I AM HODLING”, misspelledgiving rise to one of the best known expressions in the crypto world.
That is precisely what some “shrimp investors” and some “whale investors” are doing: resisting the temptation to sell, that is, HODLING.
The shrimp and the whale
Continuing in the world of cryptonian jargon, not everyone who is part of this universe is in the same category.
The shrimp are those that have less than a bitcoin (which these days is worth around US$23,000).
The whale are those who have more than one bitcoin in their portfolio of investments and the miners are in charge of generating bitcoins using powerful computer networks that work with blockchain technology (or chain of blocks), as explained by the Glassnode cryptocurrency analysis center.
James Check, chief analyst at Glassnode and an avid cryptocurrency advocate, says that despite the market’s vicissitudes, there are shrimp and whale investors who have continued to buy bitcoin in 2022.
Especially shrimp, considered as retail investors.
“Bitcoin is a unique asset in that a large part of those who have a high conviction in this smart money are retailers,” he argues in a dialogue with BBC Mundo.
This is largely due, he adds, to the fact that since bitcoin was created and during the time it began to grow, it was the shrimp that bought the digital currency, that is, ordinary individuals, rather than millionaires or institutional funds.
Other reasons have to do with the fact that education about the currency has increased and that, from their point of view, there is transparent data about the market.
“The small investor is willing to withstand any dropwhile the whale is more likely to abandon ship, if he thinks there is a prolonged period of downward pressure on the crypto market,” Moya argues.
“The crypto winter could end in these months or early 2023, but so far, both small investors and whales seem determined to hold on to their cryptocurrencies,” says the economist.