Bitcoin has lost so much value since November last year. According to estimates, all crypto assets have dropped from about $3 trillion to about $900 billion. And this marks the most recent crypto crash that has raised concerns regarding investment in Bitcoin and other cryptocurrencies. Visit online trading platform bitalpha ai if you want to get started with bitcoin trading.
Understanding a Crypto Crash
A crypto crash is a period of significant loss or a shrink in crypto assets’ value. You can compare a crypto crash to a typical economic decline. In the 2008/2009 financial crisis, many businesses closed down. Many more suffered massive losses, with some requiring government intervention to survive. Investors also lost their investments.
A crypto crash also affects crypto investors. When the value of crypto assets falls, the investors suffer significant losses depending on the size of their investments. For Bitcoin investors, the recent crypto crash means they have incurred losses because of the substantial drop in the price of Bitcoin.
But does a crypto crash spell doom for crypto investors? It’s vital first to emphasize that there have been many crypto crashes in the past. During those crashes, investors in Bitcoin lost, and some even left. And this is understandable from an investment perspective because no investor wants to invest where they are sure to lose money.
Investing in Bitcoin
Bitcoin provides a new attractive asset, and millions of users have invested in it, with many having success stories. Bitcoin is a good investment asset because of its price volatility. Typically, investors will buy Bitcoin when the price is low and sell when the price shoots up.
What is more interesting about Bitcoin is that it is suitable for experienced and non-experienced investors.
Bitcoin will expand and diversify your investment portfolio. Apart from focusing on a few conventional assets like stock or bonds, you can add Bitcoin into the portfolio and enjoy the benefits. One of the obvious benefits of doing this is that Bitcoin will spread your risks. So, you still have Bitcoin as a viable hedge when stock markets fall or fail.
Another reason to buy Bitcoin is that it will help boost the performance of your portfolio. Previous studies have found that when you invest in Bitcoin, one of the positive impacts is the improved performance of your entire portfolio. But do you still invest in Bitcoin during a crypto crash?
Buying the Dip
‘Buying the dip’ implies buying an asset when the prices are low with the expectation that the prices will stabilize and even rise further over time. And this can be an excellent strategy for investing in Bitcoin during the crash. The value of Bitcoin will be low, and you will enjoy a good discount when you buy. You can then sell the Bitcoin when prices increase.
History has shown that Bitcoin prices are highly volatile, making it a risky investment. However, a crypto crash should not discourage you if you are more averse to the risk. In the past, Bitcoin prices have gone back to pre-crash levels after the declines were over. Price drops during a crypto crash are not permanent.
Be More Cautious
But even as you invest in Bitcoin in a crypto crash, always remain cautious. Don’t invest more money into Bitcoin than you can stand losing. Moreover, invest low amounts over extended periods. For instance, you can decide to invest a certain amount of money into buying Bitcoin each month or after several months.
