As the market continues to experience hard corrections, it’s vital to learn what cryptocurrencies faired best during these times. Volatility has long been a concern for crypto traders of all types. Digital assets are known to sway in value daily and for many people, this volatility is a huge problem.
This month has seen major losses for most of the trading sector. From stocks to cryptocurrencies, traders are feeling the crushing effects of higher interest rates and inflation. The combination of these factors and the looming prospect of a global conflict have left many traders wondering if they have any options left to protect their wealth.
Understanding the different types of cryptocurrencies and how they fared during the recent crash can help you to better position yourself for future actions. One thing is for sure, once you review the data, it's obvious that not all cryptocurrencies suffered crushing losses. Some tokens even saw value increases while the rest of the market bled out.
The first type of cryptocurrency to discuss is cash systems. These cryptocurrencies were designed to operate as currencies. Protocols like Bitcoin are down over 60% from their all-time highs. These cryptocurrencies have seen considerable losses with Bitcoin showing the least amount of losses in this category.
The DeFi sector has been massacred during this correction. Sub sections of this genre such as peer-to-peer lending protocols have begun to take extreme measures to protect their operations. In the most recent revelation, the p2p lending protocol Celsius has paused all downloads. This maneuver was done to preserve the reserves of the network and prevent catastrophic failure.
NFT token holders felt the brunt of the correction with some of these unique digital assets losing +80% in value in hours. NFTs derive value differently than other cryptocurrencies. As such, there is no direct pricing standard to help traders determine the price of these assets. Instead, scarcity and a trader’s personal connection are the determining factors when valuing these assets.
When you review the data, it's evident that stablecoins faired the best. Of course, there were some exceptions such as UST/LUNA. The UST stablecoin is an algorithmic token. This designation means that it retains value through the adjustment of its circulating supply. Notably, the project kicked off the month's correction after losing its peg following news of an interest hike by the Federal Reserve.
The news sent the token spiraling with traders panicking. LUNA, the token that backs UST, felt the brunt of the actions with traders dumping their bags overnight. The project lost over 90% of its value during these actions. These maneuvers have led other developers to consider more ingenuitive ways to protect asset value pegs in stablecoins moving forward.
Fiat pegged stablecoins fared better during the crash. UST, the world’s largest fiat-backed stablecoin lost its peg temporarily but quickly regained its value after the team behind the project adjusted its backing to bolster its stability. Fiat stable coins have suffered other losses due to inflation. Sadly, these assets suffer from the same 40-year high inflation that has seen fiat currencies dwindle in value over the last month.
Gold-backed stable coins did the best when compared to other projects. There are multiple reasons why these tokens did well. Primarily, they see self-appreciation alongside their backing assets. Historically, gold has been a safehaven for traders seeking to protect their wealth during questionable market conditions.
Gold has proven to be an excellent long-term store of value, but is not ideal for daily commerce. Amongst these tokens, the ones that leveraged a basket of gold-related assets saw the most gains. Specifically, META 1 Coin gained .98% in value this month. This growth came amid the major market meltdown that saw most other projects erase a year's worth of gains.
Safehaven tokens proved their capabilities during this last market correction. Safehaven tokens combine the technical characteristics of stablecoins with advanced value locking smart contracts. These protocols integrate new systems to prevent centralization, manipulation, and asset value. META 1 Coin proved these theories this month as the token has managed to gain in value.
Considering the uncertainty of the market moving forward, it would be wise for traders to use this advice to better position their holdings for more volatility. The data reveals that when the market conditions get unpredictable, safehaven tokens could be the best way to keep your crypto wealth protected. As such, it’s time to integrate one of these helpful tokens into your trading strategy moving forward.
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