Since the beginning of this week, the cryptocurrency market has been experiencing widespread turmoil, and Friday’s broad-based drop, which put all cryptos into a tailspin, has made investors anxious.
While several famous cryptocurrencies, such as Bitcoin and Ethereum (Ether), are flickering with the various announcements made by China on the ban of crypto, the overall crypto market remains extremely unpredictable.
The plunge has sparked a wave of selling in the cryptocurrency market, as investors seek to liquidate their holdings and limit their losses in the face of further uncertainty. Simultaneously, some people have indicated a willingness to “buy the dip,” expecting a quick recovery.
Taking Risk Counts As A Big Factor: It all relies on whether one is willing to take a chance. Given the significant volatility and risk component, bitcoin may not be your chosen investment option if you’re searching for a safe, long-term investment.
However, if one enjoys taking risks and have the financial resources to invest in cryptocurrencies, it may be exactly up your alley. If one remains on top of daily trends, they can expect significantly larger returns than traditional investments, but be prepared for regular bouts of intense volatility.
In the event of increased uncertainty, the key is to be patient and not sell their investments. Those interested in crypto investing should consider diversifying their portfolios.
Great Opportunity For First Time Investors: “One now has the opportunity to purchase something they’ve always desired at a reduced price.” In other words, sticking to a strong investment plan during a moment of market instability will help one to increase the wealth over time.
Lessen price points may lower the barrier to entry for retail investors or newcomers interested in trading Bitcoin for the first time.
“The drop can also be a purchasing opportunity for younger investors looking to diversify their crypto holdings by researching altcoins like Ethereum or Litecoin.”
Count on the Surplus: The presumption when purchasing the drop is that you have enough cash/surplus on hand. When the BSE Sensex fell to 15000 levels during the stock market meltdown of 2008, a few investors bought and averaged out their investments.
Invest only what you can afford to lose and avoid the pitfalls of averaging or buying the downturn, which is nothing more than useless market timing.
Keep A Percentage For Yourself: Keep your cryptocurrency investments to less than 5% of your total net worth. If your crypto holdings are below the 5% cap, you can buy on dips if there is enough surplus. Remember that this 5% guideline isn’t etched in stone; it’s intended to protect your hard-earned cash from a highly volatile asset class. Based on your risk profile, you can always increase your allocation. I recommend that you follow this regulation until we have regulatory clarity on this and the whole crypto market has matured.
The cryptocurrency market is quite volatile. Now, whether in the stock or crypto markets, the underlying premise or hope is that prices would eventually rise. And buying at a lower entry point for a prospective price increase tends to yield higher returns. However, this isn’t necessarily the case with all cryptos. Keep in mind that stock or cryptocurrency values might fall for a variety of reasons.
Because the crypto market is still in its infancy, there is no long-term historical data to use to analyze price movements, and we can’t predict how far prices will rise following each correction. Even though short-term data implies that crypto prices have risen following past crashes, there is still a lot of uncertainty.