The cryptocurrency market has never been the same since the 2022 crash of the popular FTX exchange. Its decentralised nature and top-notch security are not enough to save crypto from falling along with the exchange. Now, crypto investors of coins such as Bitcoin, Ethereum, Ripple and more are hoping to see the coin prices rise again.
If you’re a crypto investor from South Africa, Nigeria, Kenya, and Ghana, and you’re looking for answers regarding crypto’s current and future state, you’re in the right place. Know more about it here at Crypto in Afrika.
Why is crypto falling today?
The biggest reason for the continued crypto market down is the FTX controversy that occurred last November 2022. As one of the largest exchanges in the industry, its fall from grace triggered a sell-off from crypto holders and a drop in liquidity.
However, though this was a major cause, several factors affected its popularity and adoption in Africa today. This includes volatility, economic instability, government regulations, cybersecurity risks, and unfavourable expert speculation. See the factors discussed below:
Government regulation
The continent of Africa falls behind other continents when it comes to the overall number of crypto holders in the world. Specifically, Nigeria, Morocco, and Kenya are the only three African countries that made it to the list of Chainalysis’ 2022 Global Crypto Adoption Index.
As such, the fall of the FTX exchange and the controversy that lingered from the incident has spread the discussion about regulation. Stricter crypto industry laws from governments in Africa are seen as the way forward to combat the mistrust brought about by the FTX scandal.
However, many crypto investors are undecided on the matter since regulations defeat the purpose of a decentralised market. However, it can’t be denied that government oversight can help improve traders’ experience since proper crypto regulations can lessen the risk of theft and fraud.
Lack of adoption
Although there are a lot of crypto users in Africa, there’s still a long way to go before it reaches mass crypto adoption. The crypto down has affected public interest, and the volatility of the crypto market further halts the growth of cryptocurrency adoption in the continent.
Economic instability
The pandemic has brought a great deal of economic instability in many regions, African countries included. At present, the continent is still recovering from the crisis. With an unstable economy, investors are likely to focus their investments elsewhere instead of a volatile crypto market.
Volatility and speculation
In African countries and other nations, one of the biggest risks investors face when investing in crypto is the volatility of the crypto market. This means that the value of coins, excluding stablecoins, often rises and falls depending on public interest.
Although many expected the volatility of crypto to lessen over the years, this seems unlikely to happen anytime soon. At present, crypto market activity has shown that the industry still hasn’t recovered from the collapse of crypto in late 2022.
While volatility has always been a factor of crypto, traders seem less willing to risk staking in it after the collapse of the biggest exchange in the industry. As a result, there’s conflicting speculation about the industry’s future and whether it can recover again.
Cybersecurity risks
When it comes to finance-related entities such as crypto in the digital space, cybersecurity is always an important yet difficult aspect to maintain properly. Cyberattacks on a crypto blockchain can cause individuals and businesses to suffer insurmountable losses.
That’s why many African countries need to take serious cybersecurity measures to enhance safety in the crypto industry. In this process, the focus should be on safeguarding users from crypto hacking, wallet theft, phishing, and other malicious attacks to steal users’ assets.
What to do about Africa’s crypto market decline
As Africa tries to recover from the decline in the crypto market, there are potential solutions to this if a multi-faceted approach is made. Some of these are:
- Encouraging crypto adoption
One of the best ways to resolve the current decline of the crypto market in Africa is to promote continent-wide crypto adoption. Since the value of crypto coins largely depends on people’s interest in investing in them, it’s important to encourage people to engage with the crypto market again.
To make this task possible, the best thing to do is to provide more reliable and user-friendly platforms and incentivising adoption. That way, people are more inclined to invest in crypto and work towards investment growth.
- Promoting regulation and policy frameworks
Regulation is somewhat of a grey area for crypto enthusiasts. The central idea for establishing crypto is to create a financial alternative free from third-party and government interference. However, the lack of legal oversight and the danger it poses is one of the biggest reasons why numerous nations restrict crypto use.
For the crypto industry to thrive in Africa, there needs to be a focus on building back the trust and confidence of investors in the crypto market. Additionally, there should be proper regulatory and policy frameworks. When the right steps are taken, crypto traders still have full and direct control over their assets in a secure environment.
- Raising investor awareness
One of the main reasons many people in Africa don’t invest in cryptocurrencies is the misconception that the market is too complex to understand. However, providing possible investors with proper education on crypto and how the market operates can spark interest and adoption.
To improve the public’s awareness of the crypto market, there needs to be more information on how crypto operates, strategies new investors can make, the potential benefits, and an outline of crypto trading mistakes to avoid.
- Using blockchain technology
Blockchain technology was created to support the decentralised nature of crypto. However, this is only the tip of the iceberg when it comes to its many uses. As we learned more about crypto and blockchain, we discovered that it could provide various innovative opportunities in many industries to spark economic growth in African countries.
To give you some idea, below are other areas where blockchain technology can be beneficial across different industries:
Healthcare
Through blockchain technology, the health industry can create a universal identification and record-keeping system. Once established, this is a great way to ensure that the information on patient records is not mismatched and is stored securely.
Entertainment
The entertainment industry is one of the largest and most glamorous in the world. As it continues its focus on digital distribution, proper steps to protect intellectual property from illegal distribution have to be taken. Through smart contracts using blockchain technology, proper content distribution can be facilitated without any security risks.
Encouraging regional cooperation
When you look at African countries, it’s clear that there are varying degrees of crypto acceptance and regulation. For the crypto industry to thrive in the continent, there should be a collaboration in sharing knowledge and pooling resources. When this happens, the crypto market in Africa will establish regulations and maintenance that help boost the economy.
Strategies to grow your crypto assets today
Expand your crypto portfolio when you follow the strategies below:
- Align your investment moves with the market state
At present, the crypto industry is in a bear market, which is characterised as having lower investment prices for a long period. While many see this as a downside, you can use a bear market to purchase crypto assets for a much lower price.
Once you’ve acquired crypto at a lower price, you can profit during a bear market by applying the right trading moves. This includes Short-selling, crypto staking, participating in crypto lending, scalp trading, and a few others.
- Diversify your crypto portfolio
Since the value of crypto is largely determined by the volume of investors, a drop in popularity can cause a coin’s value to fluctuate. That’s why you mustn’t stake all your money in a single crypto coin. Instead, you should diversify your portfolio and invest in various cryptos. That way, when the value of one coin drops, you won’t experience extreme investment losses.
- Choose a trading strategy
Before you start trading your crypto assets, you should be aware of the different trading strategies you can employ for better results. However, when determining the right strategy for you, it’s important to determine your risk tolerance and level of involvement in trading.
Once you know these two things, then you can choose among the different strategies such as:
Day Trading
Crypto Day Trading is a strategy where you trade daily. This is accomplished by checking chart patterns, prices, trading volumes and other KPIs within the day to make a decision.
This strategy requires a deep understanding of the crypto market and its volatile nature. That’s why you should only attempt this strategy when well-versed in the market.
Scalping
This strategy can help you make small profits by keeping track of the trading volume. With this technique, you essentially enter the market while the trading volume and price are low, then exit once the trading volume and crypto coins such as Ethereum and Bitcoin prices go up.
- Invest in stablecoin
Stablecoins are cryptos backed by real-life values such as fiat currency, gold, or real estate. While diversifying your portfolio, you must invest in stablecoins and earn interest. Using the Compound platform as an example, investors were paid an Annual Percentage Yield (APY) of 2.56% by lending DAI tokens in March 2022. Meanwhile, up to 2.03% APY is earned by lending USDC.
- Making use of copy trading
If you’re not confident in making smart trading decisions or worried about making the wrong moves, you can copy trade. Copy trading is a process wherein you mimic the trading decisions of experienced traders through software.
This is a great option, especially if you don’t have the time to continuously inspect and analyse trading charts and crypto trends. Instead, you follow the experts’ steps by copying their trades and earning the same profits.
However, since copy trading is done through software, it’s important to find the right platform where you can do so. Typically, this type of service is offered by crypto exchanges.
- Choose the right trading platform
As an investor, making your trades on the right crypto exchange platform plays a part in your success. That’s why finding the best platform to help you grow your assets is essential.
If you’re a new or prospective investor, then the factors you need to consider when choosing a platform include:
- The number of coins supported on the platform
- The different trading services provided to users.
- Trading fees you’ll be required to pay.
- Discounts and promotions are available to users.
Should you invest in crypto in 2023?
As the crypto market continues to be in a bear market, the biggest question crypto enthusiasts have is, ‘Should you invest in crypto in 2023?’. The truth is that only you can decide that for yourself.
However, as you decide whether to invest or not, keep in mind that there’s always a risk when investing in anything worthwhile. As such, always remember these two things: (1) invest only what you can afford to lose, and (2) consider the possible return on your investment once the crypto market rises again.
FAQs
Will crypto rise again?
There’s no definite way to know whether crypto can rise again. However, according to the Chief Strategy Officer of Gemini, Marshall Beard, there are predictions and market forecasts that state crypto can reach an all-time high this coming 2023 and beyond.
If you’re a crypto investor, such speculation cannot be completely ignored. As long as you invest only what you can afford to lose, there’s no harm in investing your assets in the possibility that you’ll get high returns.
Can crypto crash to zero?
In general, there’s always the possibility that crypto can crash to zero. However, when you look at the current crypto market performance, it’s safe to say that it’s not happening anytime soon.
As long as there’s a large interest in investing in crypto and improvement in blockchain technology, the market and value of crypto are expected to rise again in the coming years.
When will the crypto market recover?
It’s impossible to put a timeline on how long it will take for the crypto market to recover from its recent crash. However, there are already signs that crypto could recover in 2023. The best thing to do is to use helpful strategies during a bear market, so you can see a significant return on investment when the crypto market rises again.
