Is There a Good Time To Invest in Cryptocurrencies Amid Current Turmoil?

Key Insights:

• Investing in crypto and holding it for a long time might help escape the current meltdown.
• Crypto experts seem to be optimistic about the market recovery.
• Crypto assets diversifying could help in minimizing risks and mass loss.

As most crypto investors are having a nail-biting moment about whether their assets will return to them amid the unexpected market turmoil, many newcomers and existing users are looking to buy the dip.

A recent GOBankingRates survey noted that one-quarter of people invest in crypto assets, be it bitcoin (BTC) or ether (ETH). The majority of investors and traders are relative newbies to the crypto world, many of whom got into investing during the pandemic.

But that did not save them from being hardly hit by Monday’s brutal selloff, which pulled down bitcoin to below $24,000. Garcia, a 24-year full-time trader from Miami, lost $7K on Monday from her initial investment of $10,000 on digital assets. She noted that the losses weren’t unexpected but shocking. The trader told Bloomberg,

“It’s scary for sure. If you’re a professional trader, you know not to risk anything you can’t afford to lose. I think I’m just going to be a lot more diligent.”

Many investors are clinging to the nascent asset class, given the potential of the promising technology that is changing the world. Users believe that the current rout could rebound back shortly.

Is “Buy the Dip” mantra applicable now?

Usually, the “buy the dip” principle pops up when price drops are temporary and recover themselves over time. Dip buyers buy at a relative discount and reap the rewards when prices go up.

As the crypto market, on the whole, is very unpredictable, investing any time, including buying the dip, could be risky. While there are chances that the prices would bounce back, so are the probability that it could plunge further.

Oleg Giberstein, the co-founder of Coinrule, told Forbes publication that it is not just that crypto is down, but the overall economic outlook is bad. 

Regarding buying the dip, he advised that investors must decide on the amount they are comfortable investing to buy cryptos like BTC or ETH and not worry too much about their prices for the next two years.

When is the best time to buy crypto assets?

With crypto, everything is constantly changing. Timing a cryptocurrency buy can be difficult, if not treacherous, as all kinds of elements determine a coin’s price action.

This is so true that some people have made significant gains on the right buy at the right time, mostly not from timing the market but often by luck.

As cryptos trade all day long, even during the wee morning hours, timing crypto trades would be fraught with peril. However, experts suggest that analyzing a few months of data could generate a general trading pattern, which can be considered when buying digital assets. 

Cryptos, like any other investment asset, the best bet would be to hold in for a longer-term. According to Bob Mason, a financial consultant and subject matter expert at FX Empire, 

“Buying now for a long-term hold may make sense, though buying on the rise would be a more sound investment decision than during this current downtrend.”           

Experts are “optimistic”

A recent bitcoin report by Block, formerly known as Square, revealed that the more people believe their knowledge to be about cryptos, the stronger optimistic they are about bitcoin’s future.

On Monday, founder and CEO of SkyBridge Capital wealth management fund Anthony Scaramucci told during the CNBC’s Squawk Box show that despite the current bear market, he remains optimistic and that his fund has purchased more BTC and ETH.

Scaramucci said that bitcoin still contributes over 50% of the overall crypto market, and thus, “there is a flight to quality here.” He urged crypto investors to stay “disciplined” and not panic about the heavy drop.

One of dogecoin’s (DOGE) founders has opined on how long the current bear market would last.

it’ll all be okay eventually

just not soon 🤣

maybe like 4 years

— Shibetoshi Nakamoto (@BillyM2k) June 14, 2022

According to Bob Mason, previous selloffs and regulatory uncertainty have been key factors that make investing in crypto more precarious in the current cycle. But on the positive front, he added,

“Mainstay cryptos such as bitcoin aren’t going anywhere and will rebound. It does, therefore, depend on the investment time horizon.”

Possible mistakes to avoid

One of the primary mistakes that investors commit is not diversifying their investments. The primary purpose is to limit risks, especially in highly volatile asset classes.

The mantra is simple – to maximize returns while minimizing the risks. According to the Winklevoss twins’ Gemini crypto exchange, a well-diversified portfolio usually has a mixture of stocks, fixed income, and commodities such as gold (XAU) and oil. Or it might include one or more crypto assets too.

Anjali Jariwala, the founder of FIT Advisors, notes that investors have to diversify their asset allocations within cryptos further. One way to diversify crypto holdings is by investing in them with different use cases or purposes.

For instance, an investor could hold bitcoin, ethereum, cardano (ADA), and litecoin (LTC), each of which might perform differently under different circumstances. If an investor has deep knowledge about cryptos, there could be various other coins to hold as well. Jariwala added,

“If one cryptocurrency fails and your investment goes all the way to zero, other crypto investments may still do well.”

She said that in cases like the current extreme market meltdown, the whole crypto portfolio won’t be wiped off because of the plunge in one or two coins.