A period where prices of digital cryptocurrency assets decline are known as a crypto crash. When this happens investors lose part or all of their investments. Due to the high volatility rate of the crypto markets, prices tend to rise and fall always. Bitcoin is a cryptocurrency asset, so when the price of Bitcoin falls, investors suffer losses based on the amount invested.
But before we consider if the crash in bitcoin means an end to it, it is important to note that there have been many falls in price in cryptocurrency in the past where many investors in Bitcoin lost a large number of their investments, and some get liquidated.
Bitcoin is the largest cryptocurrency asset and is traded in many countries. It is a decent investment due to its price volatility. As is typical with any commodity, investors buy when there’s a Bitcoin crash and sell when the price of Bitcoin either goes back to the average or surpasses the expected average. Many online trading platforms also give signals to their investors when the price might likely rise or fall after careful analysis.
Bitcoin is a valuable asset like stocks and shares and you can store it as a form of value in your wallet. An advantage of investing in Bitcoin is that it might help strengthen your portfolio performance. In line with prior studies, it’s believed that after you invest within the Bitcoin market, one of the favourable impacts is the improved performance of your entire portfolio.
WHAT CAUSES BITCOIN CRASH
Bitcoin is affected by the bullish and bear market. Forces of market demand and supply also play a major role in the rise and fall of bitcoin prices. The capital market has also been undergoing a downturn, and policymakers attempt to curb inflation by rotating the money supply and increasing interest rates.
Bitcoin investment, though, has been hit particularly hard as investors have been moving away from risky assets. And the decline in bitcoin price is putting stress on institutions and other large players in the field who made investments near the top of the market.
However, the fall of bitcoin might not in entirely negative as new investors have an opportunity to ‘buy the dip’ when prices fall.
What Is ‘Buying the Dip’?
To ‘buy the dip’ implies purchasing the Bitcoin when the price is down with the expectation that the price will rise over time. And this could be a wonderful strategy for investing in Bitcoin during the Bitcoin crash. The worth of Bitcoin when it down gives you an opportunity to key in. Because of how expensive Bitcoin is, many new investors find it difficult to invest. But once Bitcoin crashes, investing becomes easy for these investors. Afterwards, you can then sell the Bitcoin when the price increases.
Like other digital assets, the price of Bitcoin is inconsistent. However, a Bitcoin crash should not discourage you. As of May 2021, Bitcoin fell by almost $20,000 putting fear in a lot of investors. But as of October 2021, Bitcoin high an all-time high of $61,374.28 restoring the shaking confidence of most investors.
However, be careful while buying the dip. Digital investments are quite unstable, and such price fluctuations have occurred in the past. As you capitalize on Bitcoin during a crypto crash, always do so cautiously. Don’t invest more cash into Bitcoin than you can afford to lose. Moreover, invest low amounts over extended periods.
For example, depending on your portfolio, you can choose to invest in bits over a long period. That way, you will be taking less risk while maximizing your profits.
On the opposite hand, whether you choose to sell your bitcoin or see a dip as a chance to acquire more, you can do so after making your analysis void of emotions. Making sentimental decisions, particularly when trading, rarely ends up well. So, before you rush into the market anxiously, it is recommended to reflect first on why you are investing in Bitcoin.
Reviewing your priorities and decisions can help you stay afloat when the market is down.
The answer to those questions can guide you in making the right decision. In either case, always stick to your own goals. Always review your investment policy from time to time. Deciding if to purchase the dip and invest long-term or cut your loss might be a good time to reflect on your broader financial goal in Bitcoin investment, how the dip affects your portfolio, and how secure your financial situation is.
It is advisable to invest only what you can afford to lose because of the volatility of bitcoin. You never know if it’s going to take a deeper plunge or increase. If you think the fall in price is temporary, you might want to hang on to your position or use a drop in the price to make additional investments. But if you believe there are chances that the crash may linger or deepen, you could want to cut your losses.
However, the need to make a tough decision might arise when you feel the market might linger and there might be little or no gain if you continue to hold your position. You can decide to split your investments and diversify the rest while you hope for a change in the market.
In conclusion, when there is a Bitcoin crash that may have you feeling rattled, use it as a wake-up call to reevaluate and assess from a different perspective why you’re involved in the market, and what opportunities are there to take advantage of when there is a crash. You can take advantage of it to boost your portfolio.
In as much as the asset has usually bounced back hard following previous major declines, there’s no guarantee that it might always be so, hence it is important to consult expert analysis and make your decision.
The future of Bitcoin might look a bit shaky now especially due to the crash, but never write off the King of Cryptocurrency just yet. There might be positive surprises in future.