- Bitcoin, ethereum, and other cryptocurrencies have experienced a wild few weeks.
- The price swings are nothing new for crypto, but with newfound mainstream acceptance, volatility presents issues.
- Insider spoke with cryptocurrency experts to see how the recent “stress test” has affected the community.
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On April 11, 2021, the price of bitcoin rose as high as $63,729.50 as enthusiasm surrounding the crypto market swelled.
For new entrants to the crypto world, this kind of volatility can be disturbing, but for old hands, it’s nothing new.
In fact, bitcoin experienced six pullbacks of more than 30% in 2017 alone, despite the price rising more than 1,000% that year.
Below, Insider breaks down how cryptocurrencies’ wild few weeks have affected the industry.
From miners to the DeFi companies, the crypto community has been forced, once again, to navigate price swings. Here’s a look at how they made out according to the experts.
Traders and Investors
Some short-term traders and long-term investors were greatly impacted by bitcoin’s recent price swing, but for others, it was business as usual.
The majority of the pain dished out by falling prices in cryptocurrencies was felt by new entrants to the space looking to make a quick buck by trading but ended up sellig coins at a loss.
According to data from Glassnode, “there is no question that a large portion of the recent spending activity was driven by short-term holders, those owning coins purchased within the last 6-months.”
Insider spoke with Todd Jones, the chief investment officer of the wealth management firm Gratus Capital, to confirm Glassnode’s findings.
Jones said that none of his long-term focused clients have been selling their cryptocurrency and noted that much of the sell-off in bitcoin’s price was a result of traders’ “leverage unwinding.”
On-chain margin traders raced to exit their leveraged positions when cryptocurrencies faced their most recent bout of volatility, according to a May 19 Daily Gwei newsletter.
Ethereum gas fees (the fee required to successfully conduct a transaction on ethereum) surged to record highs as a result driving “gas wars amongst liquidators and arbitrageurs,” according to Delphi Digital.
“The price was falling so fast that people were getting scared for their on-chain leveraged positions and were willing to pay anything to get their transaction included in the next Ethereum block (presumably to close their positions),” ethereum developer Anthony Sassano speculated, per Coin Telegraph.
Bitcoin traders using up to 100-to-1 leverage also rushed to sell, furthering volatility in the asset.
This leverage unwinding added to cryptocurrencies’ woes. However, for long-term holders of ether and bitcoin, the price drop and rising gas fees weren’t relevant.
Essentially, the most recent bout of volatility hurt traders far more than long-term investors, who still believe their holdings will appreciate moving forward.
“Recent price volatility should not be very impactful to a long-term holder of BTC. It comes with the territory. Any asset that can go up 800% in a…