Is Now The Time To Buy The Dip? – Forbes Advisor UK

As Bitcoin (BTC) fell below $ 33,000 this week for the first time in about 12 months and with Ethereum (ETH) and Cardano (ADA) also falling, the cryptocurrency market seems to be failing, or at least going through a major correction.

Given the old adage of “buy the dive” investment, investors may now be looking for a share of the volatile cryptocurrency market in the hope that this will mean a temporary decline rather than a long-term bearish market.

If you are thinking that now is the time to buy, here is a look at the above trends, some expert opinions and tips on buying if you are new to cryptocurrency.

Significant losses

Month by month *, the price of BTC is down more than 20% to about $ 32,000 today. In November 2021, it was quoted for up to $ 69,000. A drop of more than 50% means significant losses.

ETH has seen similar losses to Bitcoin over the past month, to about $ 2,400, while Cardano (ADA) has suffered even worse, falling nearly a third (32%) to $ 0.69.

While this still doesn’t match the severity of the 2018 crash, in which Bitcoin lost 80% of its value, experts say things could still get worse for those left with BTC.

It is these kinds of losses that have led the UK financial regulator, the Financial Conduct Authority (FCA), to issue repeated warnings to crypto investors. He says there are no guarantees of return and that people should be prepared to lose everything they invest.

Inflation, recession and war

Coinrule automated cryptocurrency trading platform co-founder Oleg Giberstein thinks cryptocurrency is undergoing the same stresses as other parts of the economy, leading to falling prices.

He said: “Not only is the cryptocurrency falling, everything is down and the economic outlook is bad for the next 6-12 months. Central banks are between a rock and a hard place in terms of slow economic growth and high inflation. So investors are escaping “risky” assets such as cryptocurrencies and technology stocks.

As for whether this slowdown marks the start of a long-term trend or a temporary blow, Giberstein believes the market could remain a challenge for up to two years, but added that things could get worse during that time.

Sam Kopelman, of the Luno cryptocurrency exchange, agreed that the misfortunes of Bitcoin and other currencies did not occur in isolation: “Falling below $ 30,000 leaves bitcoin on the precipice of a key support level. If Bitcoin falls below it support level could even drop to $ 25,000 before a significant move occurs.

“Investors launched assets in all areas yesterday, as global equities suffered their worst day since June 2020. The market is struggling with the consequences of the rapid rise in US interest rates, along with the military conflict in Europe.” .

Inflation data released this week by the U.S. Department of Labor and the U.S. Bureau of National Statistics is likely to have a side effect on interest rates and, in turn, cryptocurrency prices.

Kopelman says reports in the U.S. and UK should provide more clarity on market movements in the coming weeks, but he expects a volatile week ahead.

Is “Buying the Dive” a Good Strategy?

The “buy the dive” principle is based on an assumption that price drops are temporary aberrations that are corrected over time. Dip buyers expect to take advantage of the declines by buying at a relative discount and reaping the rewards when prices go up again.

Cryptocurrency markets are volatile, so buying cryptocurrencies at any price, let alone a decline that could become a long-term trend, is risky. While prices could return to previous levels, they could also fall further, leaving their investment underwater.

If the past is a prologue, then the current decline (or fall, according to your perspective) could recover like last year, when prices fell to similar levels before returning to previous levels and even peaking in the fall. But of course, maybe not.

Bitcoin prices in particular have shown some degree of seasonality to date, appearing to fall in value to a greater or lesser extent in the spring before recovering in early summer. However, as with all types of investment, much less in the unpredictable world of cryptocurrencies, past performance is no guarantee of future results.

Oleg Giberstein said: “Many novice investors have been burned trying to ‘catch falling knives’.”

He advises those who are committed to “buying the dive” to decide on a certain amount of money they like to use to buy BTC or ETH each month and not to worry too much about what happens to prices over the next two years.

Pavel Matveev of Wirex Digital Exchange advises buyers to cover their bets. He said: “It’s important to diversify your cryptocurrencies with different altcoins to mitigate the risks.”

How to buy cryptocurrency

If you’re new to investing in cryptocurrencies, we’ve put together a guide to guide you through the process, including how to choose a platform, what fees are involved, and alternatives to buying currencies directly. Read our guide to How to Buy Cryptocurrencies here.

* Correct at the time of writing

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