Thumbnail Source: https://imgflip.com/memetemplate/155841993/Analysis
Introduction
Hello everyone and welcome to another post on Vendata’s journey of the crypto world! The crypto market has experienced another strong crash this week, many cryptocurrencies falling by 10% over the last 24 hours. Just when the market was looking to recover from its previous crash, boom! another crash occurs. It is another heart-dropping event for me, when I thought that I would get back to my original investment! However, just like the other crash a few days earlier, we need to not panic. Take a deep breath. It is okay. The market may be going down, but it will not go down forever, soon it has to go up, whether that be days, weeks, or even months. What we need to do is put on our thinking caps and look through this crash, finding out what is happening to then create an informed response. Please note that this post is not financial advice and does not take any fault for any incidences which occur from this post, such as capital loss, with a purpose of educating and entertaining its readers.
Analysis
Just like the previous crash I went through, let's do an analysis of the market. Okay, essentially every cryptocurrency is red, so no matter what cryptocurrency you chose, you would have lost some money, of course excluding stablecoins. Some have been hit heavier than others, some have recovered over the past few hours better than others. Within the top 100 cryptocurrencies at the time of this post, the worst hit cryptocurrency is Siacoin at a lose of 28.5% over the last 24 hours, while the highest gain over the past hour was Arweave (data storage blockchain cryptocurrency). Now let's have a look at the dominating king of the crypto market who forces the market's trend: Bitcoin.
Looking at the 1 day time stamp, it is evident that another crash has occurred, very unpredictable in nature. What I noticed is that this crash fluctuates far more frequently than the crash from a few days before, which suggests a much more risky market for buyers and sellers. You can see the comparison with the current snapshot I took recently above and the one I took within the first crypto market crash a few days back below, the unpredictably clearly visualised.
Now let's zoom out to the past year of BTC.
If you look at the most recent lines, you can notice the two crashes that have occurred this week. The current one is the latest line within the graph, while the previous crash is the dump preceding the small rise of the current line. Moving back through the year, a similar crash is seen around March with one crash followed by a small rise, then finished with a final crash. This crash took almost 1 month to recover and begin an upward trend, which can apply to the current situation for a plausible prediction. However, this crash is more likely to take even longer to move back up with a more sudden drop at a stronger force
The Cause
Many speculations are roaming across the internet on why this recent crash has occurred, especially since one has occurred a few days back with a recovery movement, which many would consider unnatural or uncommon. One of the top ones I have found was the response of crypto investors to reports of Joe Biden (US president) considering a rise in the capital gains taxes. For those who do not know what capital gains taxes is, it is in simple terms tax given on profits that are withdrawn from an investment, like cryptocurrencies. This means that with a higher capital gains taxes there is a lower reward for US crypto investors, indicating a general fear and dislike for the possibility of a rise in capital gains tax.
Now, this capital gains tax also applies to other investment situations, including famous stock markets (e.g. Nasdaq and Dow Jones). However, doing some more extensive research, it turns out the capital gains tax is more focused on the rich. Reports stated that President Biden may propose rising the capital gains rate from 20% to 39.6% (this has been different from different sources) for those who have a yearly income of $1 million a year, which is almost double in taxes. That is huge! Think of it like this. If you had a $1 million, and made a 10% profit for a profit of $100 thousand, you get a tax of $40 thousand, rather than $20 thousand! That is a difference of $20 thousand!
Of course, if you were to lose so much on tax, it would be a good idea to cash out from the market before the tax becomes raised. And this is what is most likely the cause of our recent market crash. Rich US citizens want to save their money from taxes, and are pulling out their money now to do this, making a bulk sellout to dump the demand, and so the price of crypto.
Note that Biden's capital gains tax action is based upon rumours/reports, meaning that they are liable to errors and inconsistencies.
What To Do
What to do? The same thing as the last crash: hodl or buy. If you are keeping a cryptocurrency, then hodl. Wait. It will eventually go back up, which happened to almost everyone cryptocurrency from the previous crash. One big example I can recall is Binance Coin (BNB), which went from about 450 USD in the last crash to over 550 USD the following day and so.
However, if you managed to sell out before the crash occurred, then congratulations, you have found yourself a crypto mine! With so many cryptocurrencies falling ablaze, you cannot go wrong with which one you choose, all likely to boot back up over the week for a massive profit.
Selling is also a plausible option if you are a rich US citizen looking to avoid the possible adoption of a higher capital gains tax where the amount you withdraw now would be higher than if you did you later with a higher tax rate.
Conclusion
This makes the end of this post! Throughout the time I have taken to create this post, I have already noticed the market recovering, but in a fluctuating manner. BNB was sitting around 470 USD around the time I started this post, and now it has broken the 500 USD mark, which is a good sign for a recovery. Hopefully another crash does not come our way again, adding more troubles to the already suffering crypto market. However, this market's crash may not be over yet, cryptocurrencies continuing to fall over the next few hours/days before boosting back into its original position or even higher. Please note that the post is not financial advice, rather of an educational and entertaining purpose, with no fault incurred upon me at any incident related, particularly capital loss.
Analysing the second crypto market crash of the week, I become better at understanding the crypto market to make informed decisions, turning into a more experienced crypto person.
