The recent year was rough for cryptocurrencies. It had to go through a lot of fluctuations and as a result, a considerable value was lost. The value of Bitcoin specifically, plunged over 52% this year to date and the current value stands at around $21,000 for each coin. Undeniably, Bitcoin is the most famous cryptocurrency and its value shed about 70%, ever since it hit its all-time high.
In November, the value of each bitcoin reached roughly $69,000 and it now has dropped below $25,000. There are a few things that investors should know about fluctuations in the value of cryptos, to decide better about their future investments.
Not only bitcoin, but the entire crypto market is also at the moment experiencing the same pain, and the value of these assets has dropped significantly. In November 2021, it was at its high peak and the total value amounted to $3 trillion which has now dropped to less than $1 trillion. This is the first point when the asset class has seen such a slash. If looking for more information visit BITQL.CLOUD
Before you invest more in the market, be aware of a few things that will help you in the long run.
● The Prices May Fall Further
Considering today’s macroeconomic environment with the Federal Reserve, the interest rates may tighten to stave off high inflation, and so a few investors think that the value can further drop. Companies are hoping that a recession may hit and possibly they will experience a crypto winter.
Crypto winter can refer to a period when the prices will fall, and stay there for a prolonged period. This entry point is not good, especially for the ones who have no plans to explore the horizons for a long time. Exceptions apply and investors who want to average the dollar cost of the asset can make an entry into the market.
It is the best time to check on all your asset allocations. According to the advisors, bitcoin should form a small part of your portfolio and should be no more than 5% of the total amount. Investors who have been holding a larger chunk of cryptocurrencies in their portfolio should have trimmed the asset down after the runup in prices. They did this to make sure that crypto investment is not a significant portion.
● It Can Be A Great Opportunity For Some
Long-term investors should not hold off investing in bitcoin as this is the good time to buy them at cheaper rates. If they see a good opportunity and deal in the asset, they should keep putting in money, to earn more in the future. The rules however stay the same, and it doesn’t change for the bitcoin believers. That said, this can be a great opportunity for them to invest in some of the rewarding assets.
If you still plan to buy bitcoins, pairing it with long-term conviction is something highly recommended. Furthermore, investors who are investing in cryptos can think of it as a venture-backed investment type in terms of potential rewards and risks.
The young venture investment types have some incredible benefits, but at the same time attract a lot of volatility
● Covid Played A Big Role
Prices dropped a lot when the second wave of Covid hit the world. The second wave started in Europe at the end of 2020, but by the middle of April, it was killing people all over the world. Even though the average price reached a record high of $56,000 in April, it dropped by more than 20% between April and May.
In June and July, the average price of BTC was the lowest it had been all year. Between May and June, when the most Covid cases were reported, the price fell by more than 22%. In May 2021, there were the most Covid cases and deaths, but the average price of BTC was falling quickly.
But soon after, in July, the average price went up by about 22%, which was the most of any month. Since July, the average price of BTC has been steadily going up. When news of Omicron came out, the threat of a third wave appeared. Between November and December, the average price of Bitcoin fell by more than 15% per month. As of now, the price is slowly increasing.
● The Best Time To Educate Yourself On Cryptocurrency
This is no doubt the best time to make yourself understand the crypto concepts better. If you plan to invest in it someday, you should know the ins and outs of it. People are more after books, articles, and videos so they can go to the investment basics. Also, have an idea of the risks versus the rewards. Make sure that you put only the amount of money that you can afford to lose and also use strategies like the combat choppy price action or dollar-cost averaging to make the most of it.
● What Is There Behind The Crypto Shakeout
A few of the price actions withering with cryptocurrency are because of the companies that are failing. Some such companies include Celsius and Terra. In May, the Stablecoin of Terra, UST, plunged even below $1 in value and also made the investors avoid investing in crypto again. It has a sister coin, Luna, the price of which dipped as well.
The shakeout has also made us know what investment is complete nonsense versus what still has the hope to be continued as either the store of a value or an asset that contains some value. Though the drawdown in bitcoin prices is brutal, this is not the first time when crypto investors are facing such a storm.
The Bottom Line
The cryptocurrency market has a long history of high volatility and this is something that will not change. There are numerous such deep fallbacks of about 80%. The recent price action in the crypto market suggests that the bumpy ride with this investment will continue shortly.