The cryptocurrency market had a rough start to the year with major cryptocurrencies losing up to 50% of their value in a brutal crypto crash. The recent crypto dip is not the first of its kind and it has frequently hit the market every while. We can recall the big drop seen between May and July 2021 when Bitcoin losses exceeded 45%.
Volatility is a defining feature of the cryptocurrency market. The devastating unexpected drops highlight the high-risk tolerance that crypto traders should have. In fact, not all investors are able to tolerate a double-digit decline in a matter of weeks. That’s why crypto trading is a bumpy ride.
However, the crypto market still dominates its rank as one of the most promising investment destinations due to technological advancements and the widening use of digital money. The interest in cryptocurrencies is never affected by their volatile nature, many investors are still interested in cryptocurrency trading despite the highly volatile prices.
So, what caused the crypto crash in early 2022? Many factors contributed to the recent price dive; high leverage is the top factor. The estimated leverage ratio for Bitcoin hit a new all-time high in early January, according to CryptoQuant’s analytic data. The elevated leverage ratio has pushed BTC prices off a cliff and raised concerns about market liquidations in light of price declines.
Unlike the forex market, the cryptocurrency market faces lower liquidity. When investors liquidate their leveraged large positions, it can create a supply glut, especially in times of low demand. This explains why crypto dives usually start on weekends when there are few buyers and sellers.
The fragility of crypto sentiment has its role as well. Crypto influences and advocates are able to spur price volatility by just tweeting. Capital inflows and outflows are largely affected by sentiment levels surrounding cryptocurrencies.
Top Traded Cryptocurrencies in February 2022
As the original cryptocurrency, Bitcoin is also the most popular and highly valued, despite the high volatility that shaped its history. Bitcoin was initially created to be used as a digital payment system, but it was seen as too volatile to be used for that.
Read more on What You Need to Know Before Trading Bitcoin
Bitcoin’s market cap hit new highs of over $1 trillion in late 2021. However, the recent crypto crash brought the overall market cap to just over $666 billion with an average daily trading volume of $36.6 billion. Bitcoin has recorded its all-time high approaching $68,000 in November 2021. The top cryptocurrency is now trading around $35,000 levels, around 50% lower than its peak.
Bitcoin is the first blockchain-based cryptocurrency, created in 2009 by Satoshi Nakomoto. Since then, bitcoin has been attracting millions of investors and became the largest cryptocurrency by market cap. The virtual currency operates on a peer-to-peer network, blockchain, allowing users to make digital financial transactions without the need for a financial institution.
The crypto crash in January 2022 caused Ether (ETH) to lose 50% of its value, rolling down from its record high of $4,800 in November 2021. ETH is now trading near $2,354 with a market cap that stands at $281 billion.
Ethereum is the second-largest cryptocurrency by market cap, behind Bitcoin. Ethereum enjoys several competitive features over other cryptocurrencies. It is not just a coin, it’s an entire crypto platform with a wide range of uses. It also plays a significant role in daily digital transactions. Know more about the diverse features of Ethereum.
Previously known as Realcoin, Tether (USDT) is the third-largest cryptocurrency in February 2022, with a total market cap of over $79 billion and a value of $1.00. The market cap of Tether showed steady growth since 2020 and hasn’t been really affected by the crypto market’s frequent volatility.
USDT was launched in 2014, and is one of the first cryptocurrencies to be pegged to the US dollar.
Tether is a stablecoin, which is a form of cryptocurrency that aims to keep prices stable, compared to the usual fluctuations seen in the prices of other common cryptocurrencies like Bitcoin and Ethereum. Unlike other cryptocurrencies, a stablecoin is a cryptocurrency that is backed by fiat currencies like U.S. dollars.
Tether’s value is more consistent than other cryptocurrencies, that’s why it is favored by investors who are wary of the extreme volatility of other cryptocurrencies.
Binance Coin (BNB)
Binance coin (BNB) hit an all time high at $690 nearly 9 months ago, before giving up half its value, trading at $336. Respectively, the total market cap declined to $55.5 billion bringing BNB to be the fourth-largest cryptocurrency following recent crypto losses.
Binance coin was created by Changpeng Zhao, CEO, and Founder of Binance, a leading global cryptocurrency exchange. The currency was created to facilitate transactions on the Binance network. Since its launch in 2017, Binance Coin has expanded from facilitating payments, to being traded or exchanged for other cryptocurrencies, such as Bitcoin.
USD Coin (USDC)
The market cap of the USDC stands at $52.9 billion. Similar to Tether, the USD Coin is a stablecoin, backed by U.S. dollars which makes the currency more stable relative to other cryptocurrencies. The currency is tied at parity to the US dollar, meaning that 1 USDC should be equal to $1. The USD coin is powered by Ethereum, describing itself as the digital dollar, and can be used in global transactions.
How To Start Investing in Cryptocurrencies
You don’t have to be tech-savvy to trade or invest in cryptocurrencies. First, you have to decide whether you want to buy crypto tokens and keep them or you just need to speculate on the prices. Advanced crypto trading includes decentralized exchanges, crypto wallets, and buying tokens. However, a beginner trader can use a simpler approach by trading crypto CFDs. Know more about the Difference Between Crypto CFDs and Crypto Assets.
When it comes to investing in cryptocurrencies, you will have multiple options. You can simply purchase crypto coins directly; choices will vary between numerous cryptocurrencies. The other option is to invest in cryptocurrency companies that are focused on crypto mining and hardware developers. In case you don’t like the first two options, you can choose to invest in cryptocurrency-focused funds. NFTs are also a promising crypto investment.
Follow these steps to buy cryptocurrencies:
- Choose a reliable broker or crypto exchange.
- Open an account by providing your personal information and completing the verification process.
- Use fiat money, like the U.S. dollar, to fund your account.
- Choose a cryptocurrency to buy. Usually, reputable cryptocurrencies such as Bitcoin and Ethereum are considered to be less risky than unknown currencies.
- After purchasing cryptocurrencies, store them in a crypto digital wallet.
If you’re a crypto newbie, trading crypto CFDs can be a perfect start for you. CFD Trading is a financial derivative through which traders can speculate on short-term price movements in the financial markets including forex, shares, commodities, and indices without having to buy any underlying assets. Contracts for the difference are a form of derivative trading, which means they derive their value from the market performance of the asset.
Trade Cryptocurrencies with AximTrade
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