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Cryptocurrencies have become an increasingly popular investment, but they are also a volatile one. And the crypto sector experienced a major downturn recently. In fact, at the halfway point of the year, the total crypto market had experienced a 70% drop and was down more than $2 trillion from the all-time high valuation it reached just seven months prior.
In light of this major downturn, cryptocurrency enthusiast Mark Cuban had some wise words for current and future investors in virtual currencies.
Here’s what Mark Cuban had to say about the crypto crash
Mark Cuban is the billionaire owner of the Dallas Mavericks and is a well-known investor famous for his role on the TV show Shark Tank. He personally owns cryptocurrencies, including Ether and Ethereum-based non-fungible tokens (NFTs).
When the market downturn began, Cuban commented on the crash to Fortune, stating, “In stocks and crypto, you will see companies that were sustained by cheap, easy money — but didn’t have valid business prospects — will disappear.”
This does not mean Cuban believes all virtual currencies will be equally affected, though. As he went on to explain: “Like [Warren] Buffett says, ‘When the tide goes out, you get to see who is swimming naked.'”
Essentially, this means that when times get tough, only the currencies that have real value will continue to remain viable investments with potential for growth. Coins that don’t have underlying value — in the form of innovative technology or real-world applications — are likely to see their prices fall dramatically and will likely not be able to recover at all.
Cuban remains optimistic about the future of crypto investing
Cuban was not entirely pessimistic about the future of the crypto market. Although he believes some virtual currencies will likely not survive the downturn, he’s also made clear that he thinks others will thrive.
“Disruptive applications and technology released during a bear market, whether stocks or crypto or any business, will always find a market and succeed,” he said.
He also pointed out the tight connection between the cryptocurrency market and the Nasdaq, which is the second largest stock exchange and the exchange on which many leading tech companies list their shares, including Apple, Amazon, and Meta (formerly Facebook). Tech companies and cryptocurrencies, especially Bitcoin, tend to perform in similar ways, and that’s especially been the case in recent months.
While the Nasdaq has experienced periodic downturns, recoveries have always occurred, and the tech stocks listed on it have bounced back. There is reason to believe the same will happen to many virtual currencies — especially those that offer something disruptive or that are backed by sound technology.
“If rates go up, it will struggle till it’s priced in,” Cuban said, referring to rising interest rates spurred by the Federal Reserve’s efforts to fight inflation. “The exception, as with stocks, is for new, game-changing applications.”
All of this means that Cuban is likely not going to give up his positions in the cryptocurrencies he is invested in — and that he probably wouldn’t advise other crypto investors to abandon the sector either. That’s especially true for those who are making sound investments after careful research, which they believe will be able to weather economic downturns and stand the test of time.
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