Should Bitcoin Investors Be Worried?
Bitcoin is responsible for bringing cryptocurrency to the masses – its impressive surge in price resulted in worldwide interest in digital currencies and made people take it seriously rather than thinking it was a scam. Bitcoin opened up the world of cryptocurrency, but as the entire market tumbles the token that started it all seems to be hit the hardest. What’s causing Bitcoin’s drop in value recently, will it bounce back and should we be worried?
It Isn’t Just Bitcoin
Cryptocurrency is, by its nature a volatile market. This is in part due to a lack of wider regulation, unlike what we see with new betting sites. The important thing to note is that Bitcoin isn’t alone in this drop – in fact, the whole cryptocurrency market has dropped and there are several factors for this. As Bitcoin ushered in a wave of investors that suddenly had an interest in cryptocurrency, the digital currency market and standard stock exchange became more closely linked. Ever-increasing inflation and interest rate hikes have caused investors to be more cautious, resulting in a lot of them withdrawing capital to place it in less risky alternatives which has, in turn, caused the traditional stock exchange to dip as well as the cryptocurrency markets.
Additionally, cryptocurrency markets are often seen as a more accessible form of investing, so many first time investors start with digital currency. As Bitcoin is the most well-known a lot of people choose to start by buying this token first. This means that when the prices drop beginner investors are often quick to jump out to minimize their losses, which results in the price crashing even further.
Still, when the cryptocurrency lost $200 billion of its value in just 24 hours you can understand why investors are a little jumpier. Bitcoin dropped to its lowest point in 3 months, and even though it’s recovered a little it’s still down almost 50% since November 2021.
Should Cryptocurrency Investors Be Worried?
With the big price crash, investors are unsurprisingly split on what to do next. By its nature cryptocurrency is hugely volatile. TerraUSD was one of the most trusted Cryptocurrencies – when investors saw this happening they rushed to fellow stable coin Luna and sold off their portfolio, leaving the coin almost worthless. There will be plenty of investors that see this as the perfect time to invest more of their cash in Crypto-assets, with the hope that they can buy it at a low price and cash in when it starts to rise again. We have certainly seen crashes like this before across financial investment options and there have been people who have turned that into a success story. The problem we have is that Cryptocurrency doesn’t have an extensive history, so we can’t look back and see patterns of how it has performed before and hope that it will repeat itself.
What Are The Experts Saying?
The Bank of America called the cryptocurrency crash “the worst implosion since May 2021” and compared it to the 2008 recession which could tempt you to sell your currency before it gets worse, but many investors advise waiting it out. Bank of America’s own global cryptocurrency and digital asset strategist said that Crypto’s long-term outlook remains positive, despite the huge crash and his employer’s own damning report.
Bitcoin might be down almost 50% right now, but overall it’s up 350% since January 2021 and this is a common trend with larger Cryptocurrencies. Ethereum is down almost 30% since this time last year, but in five years the value has increased by 1214%, and a whopping 16,637% since it was launched.
Adam Dell, former partner of Goldman Sachs turned CEO of a crypto investment platform, said that investors should be looking at the value behind the money. Emerging markets and tech stocks that have the potential to change how business is done are likely to outperform market pressures and net a profit. He advised thinking about investing in cryptocurrency as investing in a start-up – many fail, but those that do succeed bring massive returns.
Should You Invest in Cryptocurrency Right Now?
Cryptocurrency is a hugely volatile market that has been difficult to predict for most of its existence. However, as digital currencies become more mainstream, the way that the markets behave becomes easier to predict because they start to align with the traditional stock market. The cryptocurrency market is never going to fully fall in line with the stock exchange because they’re fundamentally different – trading on a digital asset comes with a set of risks that aren’t remotely comparable to trading on physical products.
While the advice is mixed, particularly around lower-level investors, most experts advise staying in for the long haul if you can afford to do so. Many of the more popular Cryptocurrencies have continued to rise in value over the long term, despite multiple crashes, and experts are predicting that Bitcoin will go over $100,000 in value at some point – they consider it a case of when rather than if – so if you can afford to hold on then wait it out and see what happens. Most believe that there isn’t a need to panic, because digital currency will soon be back to its previous highs – certainly, we’re seeing a rise in digital assets such as NFTs and even virtual real estate on the metaverse, so it could be that digital is the way forward. However, if you’re looking for a short term investment that you can quickly flip and make some money on then most agreed that Bitcoin and other digital currency isn’t where you should currently be putting your money. If you’re a seasoned investor then you probably already know the risks and can make a knowledgeable decision but for anyone new to Crypto assets and investing in digital currency the advice from most is to stay away. Instead, it is better to wait and see how everything pans out and settles again before you take your first dive into Cryptocurrency investments.