Are crypto worth investing now?
The crypto market appears to be crashing – or at least going through a severe correction – as Bitcoin (BTC) dipped below $33,000 for the first time in almost a year, with Ethereum (ETH) and Cardano (ADA) also falling.
Top cryptocurrencies have had a rocky start to the year, with prices sliding with markets. While the losses are upsetting for investors, they also provide an opportunity for those considering investing in cryptocurrencies to examine their financial plans and see if the volatile asset class is right for them.
Given the ancient investment cliché of "buying the dip," investors may be hunting for a piece of the unpredictable crypto market in the hopes of avoiding a long-term bear market. If you're thinking about investing in cryptocurrencies, take a look at prior trends, get expert advice, and learn how to buy if you're new to the market.
Losses in cryptocurrency
BTC's price has dropped more than 20% in the last month, to roughly $30k. It sold for as much as $69,000 in November 2021. A decline of greater than 50% indicates serious losses.
Over the last month, ETH has lost around a third of its value, falling to roughly $1700, while Cardano (ADA) has lost nearly a third of its value, falling to $0.61.
While this isn't quite as bad as the 2018 crisis, when Bitcoin lost 80% of its value, experts warn that things could become worse for anyone still holding BTC. These kinds of losses have forced the Reserve Bank of India (RBI), India's financial regulator, to issue repeated cautions to crypto investors. It states that there are no assurances of returns and that investors should expect to lose their entire investment.
Inflation, recession, and war
Kanika Agarrwal, co-founder of Upside AI, an India-based portfolio management services company, believes the crypto slump has mimicked plummeting tech equities. Part of this is due to the fact that cryptocurrency has become mainstream, and buyers and traders are considering it as just another speculative investment. As a result, it's plummeting along with other "growth" stocks.
She believes that now is a good moment for individuals who haven't invested in cryptocurrencies to do so gradually. In terms of whether this is the start of a long-term trend or just a blip, Nischal Shetty, co-founder of India-based crypto exchange platform WazirX, says that while macroeconomic changes have caused a significant drop in cryptocurrency prices, it's worth noting that both the crypto and regular financial markets are experiencing a correction, which suggests that the cryptocurrency markets are maturing — like other markets, crypto has a bull and bear run, an upswing and downswing.
How to determine if crypto is right for you ?
To be sure, experts advise against rushing into any investment simply because it is inexpensive.
According to Ivory Johnson, a certified financial planner and founder of Delancey Wealth Management in Washington, D.C., if buying crypto doesn't meet your long-term financial goals, you shouldn't buy it just because it's trading at a discount. "I think this is a good moment to buy it if your time horizon is 10 years," he said. Otherwise, rather than attempting to time a turbulent market, he advises investors to take a more holistic approach to the asset.
Instead of getting drawn in solely because the price has plummeted, he advises investors to have a clear aim in mind when purchasing cryptocurrency. Viewing the asset as a store of wealth, perceiving it as uncorrelated to stocks, or wishing to buy it because of its rising adoption rate are all valid reasons.
People should be aware of how much of their whole portfolio is invested in cryptocurrencies before investing, and make sure the allocation matches their risk profile, according to Johnson. Before buying, new investors should have a strong understanding on how much they're willing to risk.
"If you put 20% in crypto and can't handle volatility, you've got a problem," he remarked. "However, if you only have 1%, 2%, or 3% of your portfolio, it's not as bad."
Is it a Good Idea to 'Buy the Dip'?
The "buy the dip" idea is predicated on the assumption that price dips are only transient blips that will correct themselves over time. Dip purchasers expect to profit from price drops by purchasing at a discount and reaping the benefits when prices rise again.
Buying cryptocurrencies at any price – less alone a downturn that could turn into a long-term trend – is dangerous because crypto markets are volatile. Prices may rise to earlier levels, but they may also fall even further, putting your investment at risk.
If history is any guide, the current dip (or crash, depending on your point of view) could rebound like it did last year, when prices plummeted to comparable lows before rebounding to pre-dip levels and even peaking in the fall. But, of course, it's possible that they won't.
Bitcoin prices, in instance, have demonstrated some seasonality to far, falling in value to varying degrees in the spring before rebounding in the early summer. However, as with any investment, past success is no guarantee of future outcomes, especially in the volatile world of cryptocurrency.
Praveen Kumar, the founder and CEO of Belfrics Group, believes that these are excellent entry points for investors looking to begin developing a strong cryptocurrency portfolio. In fact, investors should purchase the decline from now on because the long-term fundamentals of several well-known cryptocurrencies, such as Bitcoin, Ethereum, Litecoin, and others, are still fairly robust.
Conclusion
Cryptocurrencies will continue to be volatile, therefore investors should expect this. Furthermore, the historically dangerous asset has never been put to the test in a situation like the one we're in now, with interest rates on the increase. You should expect cryptocurrency to fall even more, so only invest what you can afford to lose. You should be able to pay your rent even if we wake up tomorrow and it's zero. It is critical to have a strong personal financial status and a defined investment plan before investing in cryptocurrency.
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