Baron Rothschild of the Rothschild banking family once said, "the time to buy is when there's blood in the streets."
Well, at the time of writing this there sure is a bloodbath in the cryptocurrency markets (July 2022). Bitcoin has slumped over 70% from its all-time high in November 2021 while others like Dogecoin and Binance Coin have crashed as much as 90%
Should investors take advantage of the crash and invest in cryptos?
Well, the one factor that should not influence your decision is the price. Crypto markets are highly volatile, so buying cryptocurrencies at any price is risky.
Rather, one must first believe in the idea of the technology and if you can foresee a value for cryptocurrencies in the future, then investing in cryptos at a low price could be a great opportunity.
Instead, one should have a clear goal for buying cryptos. It could be seeing cryptocurrencies as a store of future value, viewing it as a hedge against inflation or wanting to own it based on the assumption that cryptos will be universally adopted over time.
Experts caution against investing in small cap cryptos as they are susceptible to deep price corrections and many of them may not survive the current crash.
Investors should look at the promoters’ background, high liquidity, real-world use cases, technology and market adoption before choosing to invest.
If we were to look at historical prices, the price of bitcoins had crashed 83% in 2013 and as much as 84% in 2017.
With the current crash having wiped off over 70% already, some proponents might argue that there is limited downside from here based on previous history.
Finally, there hasn't been a continuous 4-year holding period wherein Bitcoin returns have been negative.
Investors should however expect that cryptocurrencies will continue to be volatile as this new asset hasn’t been tested previously in an environment like the one, we are seeing currently where interest rates are set to rise.
It would be prudent to use dollar-cost averaging to minimize the impact of volatility and increase returns.
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