Bitcoin fell below $33,000 this week for the first time in 12 months. Ethereum and Cardano ADA also tumbled, suggesting that the crypto market is crashing or going through a major correction.
Investors may be seeking a piece in the volatile crypto market to take advantage of an investment strategy that says “buy the dip” rather than long-term bear markets.
Here are some tips and tricks for buyers if you are new to cryptocurrency.
The price of Bitcoin has fallen more than 20% month to date, falling to $32,000 USD per month. It traded at $69,000 in November 2021. Significant losses can be incurred when the drop is greater than 50%.
ETH suffered similar losses to Bitcoin in the last month, dropping to $2,400USD. Cardano (ADA), however, was worse off, with a 32% drop to $0.69USD.
Experts warn that this is not yet as severe as the 2018 crash in which Bitcoin lost 80% of it’s value. However, experts believe things could get worse for those who still hold BTC.
These losses are what prompted the Financial Conduct Authority (FCA) in the UK to repeatedly warn crypto investors. It states that there are no guarantees for returns and that investors should expect to lose all they have invested.
Cryptoassets can be highly volatile and are not regulated in the UK. There is no protection for consumers. Profits may be subject to tax.
Inflation and downturn. War
Oleg Giberstein is the co-founder of Coinrule, an automated cryptocurrency trading platform. He believes crypto is experiencing the same stresses that other areas of the economy. This has led to a fall in prices.
He stated that it wasn’t just crypto that was down. Everything is down and the economic outlook for the next six to twelve months is dire. The central banks are in a difficult spot with high inflation and slow economic growth. Investors are now able to escape ‘risk-on assets’ such as crypto and tech stocks.
Giberstein is unsure if this downturn signals the start of a long-term trend or a temporary blip. However, he believes that the market will remain challenging for at least two years. He also warned that things could get worse during that time.
Sam Kopelman, a crypto exchange Luno, agreed that Bitcoin’s misfortunes were not isolated. “Falling below $30,000 places bitcoin on the edge of a critical support level. Bitcoin could fall further to $25,000 if it falls below this level before making any significant moves back up.
Global stocks experienced their worst day since June 2020 as investors sold assets. Markets are suffering from the effects of US interest rates rising rapidly and military conflict in Europe.
This week’s inflation information from the US Labor Department and the UK Office for National Statistics will likely have an impact on interest rates, and in turn, crypto price.
Kopelman believes that the market movements will be more clear in the US and UK reports, but expects volatility for the week ahead.
Is it a good strategy to ‘buy the Dip’?
The idea of “buy the dip” is based upon the assumption that price drops are temporary aberrations and will eventually correct themselves. Dip buyers seek to profit from dips by purchasing at a relative discount, and then reap the benefits when prices rise again.
The volatility of crypto markets means that buying cryptocurrencies at any price, let alone at a dip that could become a long-term trend, is highly risky. Prices could drop further and leave your investment in jeopardy.
If the past is a guide, the current crash (or dip, depending on how you look at it) could rebound as last year when prices plummeted to similar levels, before returning to pre-dip levels. Prices even reached their peak in the autumn. They might not.
Bitcoin prices have displayed a certain degree of seasonality, with their value falling to smaller or greater degrees in spring and then rebounding in early summer. Past performance, and the unpredictable world of cryptocurrency, is not a guarantee of future results.
Oleg Giberstein stated that “many a novice investor was burned trying to ‘catch falling knifes.
He advised those who are committed to “buying the dip” to set a monthly amount they are comfortable spending on BTC and ETH, and to not worry about the future.
Pavel Matveev, digital exchange Wirex, advises buyers to hedge. He stated that diversifying your crypto portfolios by using different altcoins is important in order to reduce risks.
Via this site CryptoCurrency Crash: Why Now is the Time to Buy The Dip