As Bitcoin (BTC) this week fell below $33,000 for the first time in around 12 months and with Ethereum (ETH) and Cardano (ADA) also tumbling, the crypto market appears to be crashing – or at least going through a major correction.
Given the old investment adage “buy the dip’” investors may now be looking for a piece of the volatile crypto market in hopes this marks a temporary downturn rather than a long-term bear market.
If you’re thinking now is the time to buy, here’s a look at previous trends, some expert opinion and tips on buying if you’re new to cryptocurrency.
Month on month, the price of BTC is down more than 20% to around $30,754 today. Back in November 2021, it traded for as much as $69,000. A more-than 50% drop represents significant losses.
ETH saw similar losses to Bitcoin over the past month, down to around $2,000, while Cardano (ADA) suffered even worse, falling by almost a third (32%) to $0.57.
While this doesn’t yet match the severity of the 2018 crash, in which Bitcoin lost 80% of its value, experts say things could still get worse for those left holding BTC.
It’s these kinds of losses that have prompted the India finance regulator, the Reserve Bank of India (RBI), to issue repeated warnings to crypto investors. It says there are no guarantees of returns and that people should be prepared to lose everything they invest.
Co-founder of India-based portfolio management services company Upside AI, Kanika Agarrwal, thinks the crypto crash has mirrored falling tech stocks. A large part of this is that crypto has gone mainstream and the buyers and traders are treating it as yet another speculative investment. Therefore, it is falling like other “growth” stocks.
She believes this is a good time for those who don’t have any allocation to cryptocurrency to buy some slowly.
As for whether this downturn marks the beginning of a long-term trend or a temporary blip, the co-founder of India-based crypto exchange platform WazirX, Nischal Shetty says that while macroeconomic changes have led to a considerable drop in cryptocurrency prices worth noting that the crypto and regular financial markets are both experiencing a correction, which suggests that the cryptocurrency markets are maturing — like other markets, crypto has a bull and bear run, and we are currently in the latter phase.
The principle of “buy the dip” is based on an assumption price drops are temporary aberrations that correct themselves over time. Dip buyers hope to exploit dips by buying at a relative discount and reaping the rewards when prices rise again.
Crypto markets are volatile, so buying cryptocurrencies at any price – let alone a dip that might become a long-term trend – is risky. While prices could return to previous levels, they could also fall even further, leaving your investment underwater.
If the past is prologue, then the current dip (or crash, depending on your perspective) could bounce back as it did last year, when prices fell to similar levels before returning to pre-dip levels and even peaking in the autumn. But of course, they might not.
Bitcoin prices in particular have shown a degree of seasonality to date, appearing to fall in value to lesser or greater extents in the spring before bouncing back in early summer. However, as with every kind of investment, let alone the unpredictable world of cryptocurrencies, past performance is no guarantee of future results.
Praveen Kumar, the founder and CEO of Belfrics Group, believes these are great entry levels for investors to start building a robust portfolio in cryptocurrencies. In fact, investors should continue to buy the dip from hereon as the long-term fundamentals of some well-known cryptocurrencies like Bitcoin, Ethereum, Litecoin, etc. are still fairly strong.
The founder and CEO of MuffinPay, Dileep Seinberg, thinks otherwise.
“..regulations will promote the value of promising good projects in crypto. But we need to wait for a few months. The dip has always benefitted crypto investors. But this time, it needs to HODL for a long to see the benefit,” says Seinberg.
If you’re new to investing in cryptocurrency, we’ve put together a guide to walk you through the process, including how to choose a platform, what fees are involved and alternatives to buying coins directly. Read our guides including How To Buy Cryptocurrency, How to Buy Bitcoin in India and How To Buy Ethereum.
*Correct at time of writing
Staff writer Mark Hooson has been a journalist within the personal finance, consumer affairs and fraud sectors for more than 10 years. He is also Forbes Advisor UK’s resident tech expert. Mark says he thrives on making ‘complicated and dry topics easier to digest’.