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Crop the ‘Crypto Crash’ | Nasdaq


By Frank Corva

In almost every crypto-related article you read these days, you’ll hear about a “crypto crash” or a “crypto winter.”

While it’s certainly true that the crypto market has taken a hit lately, it’s also true that how far you zoom in or out on your digital asset price charts plays an important role in how you perceive the crypto markets.

And it is important to recognize how much the price of digital assets has risen relative to traditional assets over the past two and a half years if we are to truly understand the current state of the crypto market better.

Let’s go back to the March 2020 stock market crash for a benchmark on how specific assets have performed since then.

SPY against BTC

If you had bought a share of the SPDR S&P 500 ETF Trust (SPY) at its March 2020 low, you would have paid around $219 for it. If you had bought a bitcoin (BTC) around the same time, you would have paid around $3,700 for it.

Today, this share of the SPY is valued at around $385, while one Bitcoin is valued at around $20,000.

In other words, if you had bought a share of SPY at its March 2020 low, you would be up about 57% on your investment, while if you were buying BTC at the same time, you would be up. by about 540%.

And this is the case despite the fact that 2021 was not the year of BTC. Instead, 2021 has been the year of alternative Layer 1 and Layer 2 blockchain networks – blockchains other than Bitcoin or Ethereum (ETH) – like Solana (SOL) and Polygon (MATIC).

Polygon (MATIC)

Polygon is a Layer 2 blockchain protocol. Layer 2 blockchains are designed to sit “on top” of Layer 1 – or base layer – of blockchains like Bitcoin or Ethereum. Layer 2s are designed to take some of the processing load off Layer 1 networks.

As recently as January 2021, MATIC was trading at just over $0.01. Today, post-crypto crash, MATIC is trading at $0.58.

So if you had bought MATIC between April 2019, when the asset hit the market, and January 2021, you would have increased your investment by around 5,800% – again, after the crypto crash.

You would have seen similar returns if you had bought SOL in January 2021 when it was trading at around $1.80, as it is now trading at around $34.

Not all cryptos are the same

Why should I point out that investing in native Layer 1 and Layer 2 protocol assets 20 months ago would still have you way in the green? Because the generic term “crypto” is very misleading.

Often when the media – especially the mainstream media – reports on digital assets, they report on those assets as if they were all the same, which is far from the case.

In the broader crypto ecosystem, there are governance tokens (eg AAVE, MKR), oracles (eg LINK, BAND), privacy coins (eg XMR, ZEC), security tokens (eg exchange (e.g. BNB, FTX) and a wide variety of other types of digital assets. Some of these assets are still trading far from the lows they have seen over the past two and a half years, and some are not.

Native assets for Layer 1 and Layer 2 alternative blockchains are a type of digital asset that has held up relatively well in price.

In 2021, the alternative narrative of Layers 1 and 2 shifted into high gear, as the prices of assets such as MATIC, SOL and AVAX – the native asset of the Avalanche blockchain – took off.

These assets are the currencies that power the new virtual economies of decentralized finance and NFTs. And they’re still worth a lot more than 20 months ago.

Measuring digital asset prices from historic lows

The digital asset market is still very young. Like the price of any booming technology, the prices of all crypto assets are currently experiencing extreme volatility. Consider the historical price action of Amazon and Meta Platforms shares – formerly known as Facebook – as a benchmark.

Volatility, however, is not an indication that these assets are dead. Nor does it mean that we are guaranteed to be in an extended “crypto winter”.

Most analysts and media would have you believe that crypto is over and investors should just pack up and go home.

When you measure the current prices of most crypto assets from their all-time highs, their perspective is understandable.

However, I urge you to consider how far the prices of specific digital assets are from their historical lows – lows they experienced less than two years ago.

During these slowdowns, it sometimes helps to zoom out to see how far we’ve gone rather than how far we’ve fallen.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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