Will The Crypto Market Crash Again?

Last Updated July 23rd 2021
11 Min Read

The crypto market has crashed, but it is showing signs of having bottomed out. However, after a 50%-plus crash for Bitcoin, and over 70% crash for altcoins, it’s only natural to wonder, will the market crash again? 

After the Covid-19 triggered crash in 2020 and the China-driven crash in May this year, it is clear that market crashes are part of the game. It is also quite clear that as an investor, you have very little control over such occurrences.

However, one can find comfort in the fact that if the crypto market crashes again, it will not be something out of the ordinary. Crypto market crashes have happened multiple times since Bitcoin came into existence. None of them was anticipated.

In essence, thinking too much about when the market will crash is pointless. That time would be better utilized coming up with strategies on what to do before the crash, when it happens, and after. In this article, you will learn all you need to know about crypto market crashes.  

With this information, you can be fully prepared to handle a crash and benefit from it.

What Is A Crypto Market Crash?

A crypto market crash is a sudden drop in the price of cryptocurrencies driven by fear that worse things could happen in the market. Essentially, after the first dip in price, news of an even further slide in prices creates tension. What follows is that investors start selling their cryptos en masse, in an attempt to cut their losses. This creates a downward spiral, as supply quickly overtakes demand.

How long a crash lasts, or how intense it is, varies with the circumstances that cause it. If the crash is intense and lasts a long time, it can have long-term effects on some cryptos. For instance, cryptos without much reserves in their treasuries or have unsustainable governance models can run out of money.

Though they can be years apart, crypto crashes are quite a regular phenomenon.  However, that is not a reason to fear them. Crypto crashes are the best times to buy high-value cryptos at deep discounts. Besides the more severe crashes, minor ones are a healthy part of the market and help keep the market equilibrium.

When Will The Crypto Market Crash?

The crypto market has already crashed and could be close to a new recovery cycle. However, if you are wondering about when it could crash next, then the short answer is, no one knows.

The crypto market, like all markets, is ever moving up and down. The factors that cause these movements are diverse and pretty hard to predict. Even now, when it is trading at deep discounts, bad news from any of the major economies, a hack of a major crypto exchange, or pretty much anything else, it can send the market tumbling down further.

That said, one can take lessons from the current and previous crypto crashes. By understanding the history of crypto market crashes, one can easily tell the market’s stage right now and prepare for the future.

Check Out: Cryptocurrency Market Crash Checklist: 10 Things to Do

Crypto market crashes throughout history

The crypto market has gone through multiple crashes in the last decade. The worst among them was November 2013, when Mt. Gox was hacked, and the 2017 one. The 2013 hack saw Bitcoin, the top crypto, collapse by 86.9%, while 2017 saw it drop by 86.3%.

Looking at past crypto market crashes makes it easy to learn about the most common causes of crypto market crashes. It also makes it possible to understand whether a crash will happen again.

For instance, after the 2013 crypto crash, it became clear that a hack involving any of the major exchanges can be catastrophic. However, it is also clear that after every crash, the market comes back stronger than ever.

The COVID-19 triggered crash

Following the uncertainties that the COVID-19 pandemic brought, the crypto market, alongside other markets, crashed in March 2020. However, this was short-lived, and by the end of the year, the market had already surpassed its all-time highs.

The recovery was due to an assortment of factors, key among them being the need for a new avenue for diversification. Interest rates have been low for close to a decade, and with the aggressive stimulus programs that came with the pandemic, fears of hyperinflation increased. With gold, bonds, and other safe havens increasingly correlated to the stock markets, the need for an alternative has become even more acute.

Bitcoin, and crypto in general, has become quite an attractive alternative. This saw the market rally in late 2020 and all through Q1 of 2021. Whether this will continue after the crash in May is unknown. Another crash could always be around the corner.

Can You Predict A Crypto Market Crash?

It is easy to look out for potential market crashes based on what has happened in the past, including the most recent ones. However, there is no foolproof way to tell when the next one will happen.

Just like the equity markets, there is simply is no way to time the market. Even people who have hit jackpots timing markets in the past were simply lucky. However, that is not to say that one cannot prepare for the next time a crash happens. Just like one always carries a spare tire, even if they don’t know when they might need it, it is possible to anticipate and prepare for a crypto market crash.

To prepare for a crypto market crash, you need to know how to place your investments before it happens and after it happens.

Read More: A Cryptocurrency Market Crash May Be Coming: 5 Things to Do Now

Will The Crypto Market Crash Again In 2021?

The crypto market has crashed, and at this point, investors are waiting for it to hit the bottom.   While anything can happen in such a volatile market, the next possible move is upwards. That’s unless something catastrophic happens and leads it to collapse even further.

The market is undervalued.

Before May this year, the crypto market was heating up, and there were concerns that it was in a bubble.  The market cap was at over $2 trillion, and meme tokens with little to no underlying value hit all-time highs.

That bubble burst when Elon Musk raised concerns about Bitcoin’s environmental impact. China’s crackdown on Bitcoin mining accelerated it. While these are fundamental issues, the crash is indicative of a market that was hugely overvalued.

However, with Bitcoin shedding over 50%, and most altcoins down by upwards of 70%, the market is at an enticing level for value investors.

The best investors get in at such times.

At this point, when the market has been crashing for over two months, it might feel like everyone is pessimistic about the crypto market. However, this is far from reality.

While novice investors may be selling at a loss, driven by fear, institutional players (smart money) are getting into crypto. To have a better idea of when to get into crypto, pay attention to the moves of such investors.

You will notice that a lot of them are getting into crypto right now, either directly or through derivatives. News of institutions buying billions of dollars worth of crypto is quite common lately. This is a positive indicator that the market is headed for a recovery.

Following the moves that smart money makes can be one of the best decisions, you make when investing in the crypto market.

Buy your cryptos on sale.

The best time to invest is when you buy your cryptos on sale – 50% or more below their true value. This opportunity has presented itself in the last two months.  At the moment, Bitcoin is down by over 50% from its all-time highs, while most altcoins are down by over 70%.

However, even as you invest, you need to be conscious of the fundamentals of the cryptos you are getting into. One must try and buy into cryptos that solve a real problem, are decentralized, secure, and have a strong team behind them.

At the moment, a lot of good cryptocurrencies that show these characteristics are down by over 50%. This means they have huge potential for exponential gains once the market rebounds.

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What Should You Do Now That The Market Has Already Crashed?

One of the rules to investing is always to be ready to capitalize on an opportunity when it comes up. In the current market setup, the crypto market is ripe for investment.

However, even with crypto prices at rock bottom, the basic rules of investing still apply.

Be patient

The market may be at rock bottom, but that does not mean you throw money at any random cryptos. Be patient, and carry out your analysis properly. By exercising patience, you can find projects that have lost value by over 50% and are fundamentally sound.

However, even as you exercise patience, you need to make a move and be decisive. Under current market conditions, it is easy to be afraid that the market could go down further.

While this is a valid concern, remember that you are investing for the long haul. As long as the entry price is right, you will eventually turn a profit. Being too afraid of making a move can cost you if the market makes a V-shaped recovery.

Stick by your cryptos

Buying cryptos under current circumstances shouldn’t be on impulse. They should be cryptos that you have studied and fully understand. In other words, these are cryptos that you knew have a high potential, even before the crash.

The low prices across the market can easily sway you into buying into random, low-quality projects.

Don’t waste your cash on such projects. Buy cryptos that you are confident in and have the fundamentals to bounce off current prices, and thrive going into the future.

In case you are just getting into the market, certain bare minimums should guide your investing journey.

The first one is the team behind the project you are looking to invest in. Due to the unregulated nature of the crypto market, the space has become a haven for scammers. People regularly launch tokens, dump on novice investors and leave the project to die. Therefore, try as much as possible to stick to projects that have reputable teams behind them.

Secondly, look at the level of decentralization of a project. The more decentralized a crypto project is, the lower the chances of getting scammed. That’s because there is no central locus of control that would be catastrophic to the project if it were to be removed.

Third, and most importantly, make sure the project you are eyeing has a strong use case. The crypto market has a lot of projects that are out to ride the waves. Such projects are usually a copy of more established projects or have a very weak use that is unlikely to stand the test of time.

Check Out: Now Is The Best Time To Find And Buy Your ‘Forever Cryptocurrencies’

Prepare for the worst.

Just because the market crashed two months ago does not mean it will make a V-shaped recovery. You need to know that it can take years before the market recovers from current prices.

As such, whatever crypto you are buying, just know that you are doing it for the long term. Once the market rebounds and makes new highs, be psychologically prepared to sell, and book your profits.

How to prepare for a crypto market crash

Now that the market is showing signs of a recovery, will there will be another crash? The answer is yes. Crypto is not an asset class that operates in a utopia. Like other markets, it will crash many times again in the future.

To always stay profitable regardless of the market direction, you need to invest time and resources in finding quality investable cryptos. To help you stay ahead of the game, check out this crypto market survival guide for an in-depth understanding of the crypto market and how it works.

eToro – The Best Platform to Buy Cryptocurrencies

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Virtual currencies are highly volatile. Your capital is at risk.

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