Bitcoin and other cryptocurrencies have always been somewhat unpredictable. Their rapid rise to high values has been punctuated with major dips, and it seems like we’re in one of those dips right now. This recent volatility has many potential crypto traders wondering whether now is the time to buy or sell.
Bitcoin Shows Steady Drop During 2022
2021 was undoubtedly the best year ever for Bitcoin. The coin hit all-time highs of over $67,000 in November after having started the year at less than $30,000. The peak in November came after a major drop from the former all-time high in April of around $63,000. This example shows just how quickly Bitcoin can rebound from the kind of drop we’re seeing now.
Bitcoin is once again under $30,000 today, a value it first fell below on May 11th. That date marked the first time that it had done so since the major dip in July 2021. Many investors view $30,000 as a significant landmark and believe that if Bitcoin can’t recover very quickly, it may stay below that limit for some time.
2022, in general, has seen a steady downward trend with only minor recoveries. Bitcoin and other cryptocurrencies had already seen much of their all-time high value wiped out by the end of 2021. While April 2022 saw some promising recovery, the trend didn’t hold, and now investors are left teetering, unsure whether they should buy or sell.
Major Crypto Disaster Reduces Investor Confidence
While cryptocurrencies across the board are down, one recent crash will be remembered as one of the biggest crypto disasters in history. Terra was a stablecoin project that was worth over $60 billion at its peak. It included the TerraUSD stablecoin that was meant to maintain a value of one US dollar and the LUNA cryptocurrency that played a part in the algorithmic balancing that kept TerraUSD steady.
However, things didn’t go as planned. On May 7th, the stablecoin began to fall from $1 and eventually reached a value of 35 cents on May 9th. This, in turn, destabilized LUNA, which fell from $80 to mere fractions of a cent in just a few days. For all intents and purposes, it went to $0, and investors around the world lost over $45 billion.
This sent a shockwave through cryptocurrency markets, with just about every cryptocurrency taking a hit. Combined with recent downtrends, most cryptocurrencies are at the lowest value they’ve seen in over a year. While there are plans being put in place to salvage the Terra project, this disaster has highlighted the potential volatility of all cryptocurrencies.
It’s also evident that the reputation Bitcoin has received due to heavily promoted get-rich-quick schemes like “Immediate Edge” is quite justified in many cases. Once exposed, these schemes are not exactly confidence boosters.
Is Now the Time to Buy?
Traditional investing strategies are based on one simple rule. Buy low, sell high. Prices are down right now, so it must be a good time to buy, right? Well, this principle only works if prices eventually rise again, which nobody can really predict. Bitcoin and the market, in general, have always rebounded from crashes before, but volatility in the market should give investors a reason to think carefully about their investments.
The professional advice is to carry only a relatively small portion of your investment portfolio in cryptocurrencies. The failure of the Terra project has shown that cryptocurrencies can, and do, go to $0. The level of volatility found in crypto markets today means that you shouldn’t be investing anything you aren’t willing to lose.
How Long Will Bitcoin Take to Recover?
So let’s say that you invest in Bitcoin today. When can you expect to start turning a profit? Nobody can know for sure, but investors should understand that they could be in it for the long haul. In the past, Bitcoin has dropped from all-time highs and spent several years at a time at lower prices.
It has always eventually rebounded to higher levels, but investors will have to show patience. There are many people out there who held Bitcoin at some point and sold it at $1, $1,000, or even $10,000 and missed out on huge profits. Buying Bitcoin today could be a great investment, but trying to time a market with this kind of volatility is something that few investors have been able to do.
