Binance released its highly anticipated proof of reserves (PoR) on Friday, providing blockchain-based evidence for the Bitcoin on its books. However, many in the crypto community question Binance’s approach, and aren’t fully convinced that they have the transparency they’re looking for. The Move to Proof of Reserves As Binance explained in its announcement, the exchange’s transparency system will add multiple tokens and networks within the next two weeks. For now, it solely validates its Bitcoin holdings. The company’s initial audit…
The date was the 22nd of December, 2017, when the inevitable happened. Bitcoin’s value dropped suddenly by 45% from its peak after it had been soaring for an entire year. The bubble burst, and the doom had come. The dream of a new era financially dominated by cryptocurrency was put on hold.
Today, we look back at what led to the Great Crypto Crash two years ago. We try to find out how it changed the market and answer one of the questions that are on any investor’s lips:
Is it safe to invest in crypto in 2020? Let’s find out!
A Brief History of the Crypto Crash
At the beginning of 2017, Bitcoin enjoyed consisted bullish support to trade at $973. There was no forecast for a rapid ascent or a bubble anywhere on the horizon. The most popular crypto continued to hover over the $1,000 long into May.
Then, the value of 1 BTC quickly doubled, and in a matter of days, it went over the $3,000 threshold. The primary reason for this fast ascension was the influence of Wall Street analysts. Some of the most experienced brokers in the US at that time started to publicly predict that Bitcoin’s price will skyrocket through the roof by the end of the year.
The highly optimistic views of well-trusted financial experts produced a tsunami in the cryptocurrency market. In the next few months, the BTC value continued to rise, and Bitcoin made headlines worldwide.
Suddenly, people who had not even heard of blockchain, digital assets, and mining Bitcoins discovered an arduous passion for the topic. First-time investors sold their houses and took out loans to get on the Bitcoin bandwagon.
In only one year, Bitcoin increased by 2,700% in value. It even set a record high of $19,891 US on the 17th of December on the Bitfinex exchange. Expert analysts were not shying away from predicting an imminent burst of the Bitcoin bubble. Still, people continued to buy into one of the most profitable ventures of the 21st century.
Here is how the Bitcoin price developed during 2017, according to coinmarketcap.com:
Bitcoin managed to drag several other altcoins in its ascent to a never-before-seen peak.
The second-most popular digital asset, Ethereum, jumped from a January 2017 value of $8 to almost $700 in less than a year.
Litecoin, which was a charismatic spin-off series of Bitcoin at the time, increased in value by almost $9,000 throughout 2017.
Ripple’s XRP started that year trading at $0.006 and peaked at $2.50 by Christmas time.
To have an idea of how much had changed on the crypto market in 2017, you can look at today’s trading values of Bitcoin and the other altcoins:
- Bitcoin – $7,343
- Ethereum – $147
- Litecoin – $44.75
- Ripple – $0.217
Towards the end of the year, people would resort to all kinds of shenanigans to get their hands on a few Bitcoins. Some of those who wanted a share of the pie would even buy paper wallets with cold hard cash.
In the end, the exchanges could not support the high demand for cryptos on the market. The bullish run hit a bearish barrier on December 22, 2017, and Bitcoin dropped below the $11,000 barrier. The ride had ended and left many counting their profits or their losses.
How did the last 2 years change the crypto market?
2018 started with a frantic mob of late Bitcoin investors who were desperate to sell their coins for anything they could get, even if it meant less than half of what they paid initially. The most optimistic ones held to their new acquisitions, hoping that the bulls would make a quick comeback.
These two types of behavior accelerated the decline of the BTC price and the crypto market with it. In less than six months, Bitcoin was trading again at nearly $4,000, and it continued to do so for almost an entire year. In the summer of 2019, its value surpassed an unexpected $12,000 barrier before dropping again towards the $6,000 mark.
Here is how Bitcoin performed in the past two years, courtesy of coinmarketcap.com:
The altcoins followed suit, but in exchange for dropping value points, they increased their popularity. Due to the Great Crypto Crash that held the headlines for weeks, they received a much necessary boost of notoriety on the market.
The exchanges also thrived, and the lessons learned in the aftermath of the bubble burst helped them improve their activity and prepare better for potentially similar events. Binance and BitFinex were well-known even before the crash, but other names also rose to popularity, such as Bitstamp, Coinbase, Kraken, and Poloniex.
Is it safe to invest in crypto in 2020?
Since the Great Crypto Crash of 2017, the market has undergone drastic improvements. All of the actors involved have taken precautionary measures to make the infrastructures more secure. Exchanges have upgraded their structures, and the new wave of developers has come up with better whitepapers.
Also, the general public no longer looks at Bitcoin as a means of getting rich overnight. People regard it as a serious financial venture that requires knowledge, preparation, and calculated risks. As a result, the battle between the bulls and the bears is more balanced, and the odds of a new bubble-crash scenario are lower today than they were two years ago.
Finally, in 2020, those who want to invest in cryptocurrency can rely on better resources than those available in 2017.
Investors can employ the services of brokers and exchanges to guard over their investments. Additionally, they can use instruments like futures contracts, staking platforms, and crypto custodians. These tools are great for those who want to dip their feet into the cryptocurrency market without going too deep or risking too much.
Investing in cryptocurrency in 2020 could be a safe and profitable venture for most investors out there.