The crypto craze has been a major talking point for investors in recent years. From a much-watched all-time high of almost $20,000 in 2017, to a staggering fall of around $3,000 in the following year, the market of digital currencies has proven to be highly volatile. This fast-paced growth and decline has led many people to consider whether the boom in cryptocurrencies is sustainable or whether it will eventually become a bust.

To analyze this, we must first consider why the market is so volatile. A speculation-driven market has led to investors pinning their hopes on the promise of the value rising, without the evidence of backbone assets. Without a safety net in place, any buying surge based on hype could be met with an equal and opposite selloff in due time. The same can be said of cryptocurrencies as trading with these digital assets is based heavily on speculation, not tangible real world value.

Furthermore, the unregulated nature of the crypto market also presents an unforeseeable risk. Despite efforts to enforce regulations - such as the Securities and Exchange Commission’s (SEC) crackdown on ICOs - unsuspecting investors are still falling for Ponzi schemes and other scams which often steal life savings in minutes.

On the other side of the spectrum, those in support of crypto point to its intrinsic use. With the potential to disrupt the existing traditional banking system, the use of Bitcoin and other digital currencies to bypass complicated mechanisms can be highly thought of and attractive to many investors.

In addition, the use of cryptocurrencies has been growing in reach. Merchants have been increasingly accepting cryptocurrencies as a form of payment, and various projects are experimenting with the underlying blockchain technology. It is the scope of these developments that show that the sector is still in its early stages and has plenty of potential for further innovation.

While there is a risk that the current market valuations may be over inflated, cryptocurrencies have the potential to remain a strong investment for many. The best way for investors thinking of entering the market is to remain aware of the dangers and keep a vigilant eye on any upcoming regulations or developments. With cautious trading, following the notion of a “buy the dip” philosophy, it is possible to protect yourself from any potential losses. For now, the future of cryptocurrencies remains largely unknown and only time will tell whether it is here to stay.



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