The crypto market looks 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.
Given the ancient financial cliché of “buy 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 considering about investing in cryptocurrencies, take a look at prior patterns, get expert advice, and learn how to buy if you’re new to the market.
Significant losses have occurred.
BTC is now trading at roughly $32,000USD, down more than 20% month on month*. 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 $2,400USD, while Cardano (ADA) has lost nearly a third of its value, falling to $0.69USD.
While this isn’t quite as bad as the 2018 crisis, when Bitcoin lost 80% of its value, experts warn that things might become worse for anyone still holding BTC.
These types of losses have caused the Financial Conduct Authority (FCA) of the United Kingdom to issue repeated warnings to crypto investors. It states that there are no assurances of returns and that investors should expect to lose their whole investment.
Inflation, Recession, and War
Oleg Giberstein, co-founder of automated crypto trading platform Coinrule, believes that crypto is experiencing the same challenges as other sections of the economy, resulting in price declines.
“It’s not only crypto that’s down; everything is down, and the economic forecast for the next 6-12 months is bleak,” he stated. With slow economic growth and high inflation, central banks are caught between a rock and a hard place. As a result, investors are avoiding ‘risky’ assets such as bitcoin and tech equities.”
When it comes to determining whether this slump is the start of a long-term trend or a one-time blip, Giberstein believes the market might stay hard for up to two years, but things could become worse during that period.
“Falling below $30,000 leaves bitcoin on the verge of a major support level,” said Sam Kopelman of crypto exchange Luno, who agreed that Bitcoin and other coins’ troubles were not occurring in isolation. If Bitcoin goes below this support level, it might fall as low as $25,000 before making a strong recovery. Global markets had their worst day since June 2020, as investors liquidated assets across the board. In addition to armed war in Europe, the market is facing the effects of fast rising US interest rates.”
The US Labor Department’s and the UK’s Office for National Statistics’ inflation data released this week will almost certainly have an impact on interest rates and, as a result, crypto prices.
Is it a good idea to “buy the dip”?
The ‘buy the dip’ idea is predicated on the notion that price dips are only transient fluctuations that will right themselves over time. Dip purchasers expect to profit from price drops by purchasing at a bargain and reaping the benefits when prices rise again.
Buying cryptocurrencies at any price – less alone a downturn that might turn into a long-term trend – is dangerous since crypto markets are unpredictable. Prices may rise to earlier levels, but they may also fall much more, putting your investment at risk.
If history is any guide, the current dip (or collapse, depending on your point of view) might rebound as 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, previous success is no guarantee of future outcomes, especially in the volatile world of cryptocurrency.
“Many a rookie investor has been burnt attempting to ‘grab falling blades,” according to Oleg Giberstein.
He urges anyone interested in ‘buying the dip’ to set aside a fixed amount of money each month to buy BTC or ETH and not to be overly concerned about price fluctuations over the next two years.
Buyers should hedge their bets, according to Pavel Matveev of the digital exchange Wirex. “It’s critical to diversify your crypto assets with several cryptocurrencies to reduce risks,” he stated.