Did you miss the opportunity to buy Bitcoin (BTC) when it was first released in 2009? Bitcoin was launched at a price close to zero. However, it didn’t reach $1 until February 2011, when it started real adoption. It then rose to $10 but was back to $5 by the end of the year. However, those who invested in those early days could see a tremendous return on their investment. Now, Bitcoin is falling just over $23,000. Bitcoin has dropped more than 28 percent in the past year, even though it started rising in July 2022 and rose more than 13 percent last month. Nowadays, investors are asking, “Should I buy Bitcoin dips?” she wonders…
Why Did Bitcoin Drop?
Bitcoin’s price has plummeted as a result of a widespread crash in the crypto market. Or it would be more accurate to say that the collapse of Bitcoin created a crypto winter. Other cryptocurrencies that are considered altcoins tend to follow Bitcoin’s lead with their price fluctuations.
The month of June saw Bitcoin drop nearly 40 percent since its all-time high. The drop followed an overall bear market that also affected equities and was driven by a number of factors.
Inflation and rising interest rates create bear market
High inflation rates have created fear in the consumer market as governments print and distribute money during the pandemic. At the same time, the Russia-Ukraine war led to higher fuel prices, creating further inflationary pressure across the US.
As a result, the Federal Reserve voted for a series of rapid rate hikes. This tends to make the cost of borrowing more expensive for businesses, increasing bond yields and ultimately lowering stock returns. Cryptocurrencies have been followed by the stock market lately. However, in recent times of stock market, rising interest rates and inflation, Bitcoin is not the only factor affecting it.
Factors affecting bitcoin and cryptocurrency markets
The crypto market is highly volatile with the potential for huge fluctuations, huge gains and losses. Many experts attribute the current cryptocurrency crash to a stablecoin. When TerraUSD crashed, it sent shock waves through the crypto investment community, lowering confidence in cryptocurrency as an investment. Experts say that the fact alone makes this crypto winter different from previous crypto crashes.
Then, as Cryptokoin.com reported, Celsius Network, a US crypto lending firm, froze withdrawals and transfers due to extreme market conditions. Bitcoin dropped below $23,500 after the event. Celsius Network wasn’t the only company in the crypto industry to be affected. Major exchange Coinbase laid off 18 percent of its employees, and other companies froze layoffs and hiring.
Are the declines in Bitcoin and the crypto market worrying?
All this news causes serious concerns for investors, which of course led to additional sales and further declines. But investors know that all markets experience ups and downs. Is this crypto winter any different? Will Bitcoin recover?
If you look at the stock market’s long, turbulent history in parallel with that of cryptocurrency, it seems safe to say that investments will eventually rise again. By tracing the history of previous economic crashes and rebounds, from individual stocks to indices like the Nasdaq composition, you can see that markets have trended upwards over time. And when it comes to Bitcoin in particular, Bitcoin has gone through multiple crash cycles in the past. But he always came back with a vengeance. In fact, 100 percent of people who have bought and held for four years or more have had a positive return on their investment.
Should Bitcoin be invested when it’s low or high?
Obviously, you want to buy low and sell high to get the most return on your investments. If you had bought Bitcoin when it was around $10 in 2011, you would be in a lot of profit right now. On the other hand, if you’ve invested when Bitcoin was near record highs or crossing the $50,000 or $60,000 mark, you’re probably looking at your portfolio right now and sweating a little. Although Bitcoin has shown a slight rise in recent weeks, it is still a long way from its peak. If you’re trying to buy from the bottom, you still have time. There is a way to minimize your risk without trying to time the market. Creating an investment plan and using dollar-cost averaging.
Divide your total investment amount by time and buy at periodic intervals when Bitcoin price drops. Even if it continues to rise, stick to your investment strategy. We may be approaching the end of the crypto winter. If you buy Bitcoin now at $20,000 and reach its previous peaks, you’ll have a more than 300 percent return on your investment. Of course, crypto is a highly volatile investment. Also, there is no guarantee that it will recover, let alone reach its former peaks. Do not invest more than you can afford to lose. However, understand that investing now and waiting for Bitcoin to recover can be stressful. Investing in a bear market requires patience and the ability to forget your investments, perhaps for years.
Will Bitcoin Recover in 2022?
If you are currently looking for a short-term investment, Bitcoin is probably not the answer. Despite the recent gains, analysts are undecided on whether Bitcoin will drop below $20,000. Martin Hiesboeck, Uphold’s head of blockchain and crypto research, said:
The market is vulnerable and nervous not because of the threats from more crypto projects, but because of the difficult economic situation we are facing right now.
Experts believe that Bitcoin will hit above $38,000 by the fall of 2022. It even has the potential to potentially reach $40,000 by the end of the year. In 2023, however, it could surpass its previous highs. The consensus among experts is that Bitcoin will recover, but there is always a risk.
Conclusion
If you want to buy the Bitcoin drop, now might be the time. However, it is important to make sure that you do not make crypto part of a diversified portfolio. The bear market and crypto winter are creating many opportunities for investors with high risk tolerance. But it is important to invest carefully.
If you are considering any cryptocurrency investment, Bitcoin would be your most reputable choice. It is also one of the most accessible cryptocurrencies. Avoid new altcoin projects with no staying power.
