The crypto market is no stranger to volatility, but the past year has been particularly rough. Despite a slight recovery in recent weeks, the largest crypto-currencies are still down substantially from their historical highs.
The price of Ethereum, for example, is down about 66 percent since its November peak. Bitcoin is down more than 71 percent from its peak, and Solana is down 86 percent.
While some investors fear a market collapse is imminent, is it really the right time to invest in crypto-currencies? It depends.
Should you stop investing for now?
In some cases, it may make sense to take a break from investing, especially if money is tight.
Market downturns are one of the worst opportunities to sell your investments, as prices are significantly lower. If you invested in crypto-currencies several months ago and are selling now, you are selling at a very low price and will have heavy losses.
No one knows exactly where crypto is headed in the coming months. But if you can’t afford to leave your money invested for at least a year or two, it may be best to avoid investing for now. If crypto prices continue to fall and you suddenly realize that you need the money, selling your investments could result in losses.
The case for continuing to invest
If you have a strong savings reserve and can afford to continue investing, now could actually be a fantastic buying opportunity.
Crypto-currency is a notoriously expensive investment, and buying now means you’ll have the chance to invest at a fraction of the cost. Bitcoin, for example, cost nearly $70,000 per token at its peak, and is currently valued at around $21,000 per token. As for Ethereum, which reached an all-time high of about $4,800 per token, it now costs about $1,700 per token.
The key, however, is to hold your investments for the long term. Crypto-currencies can be extremely volatile, and it’s almost impossible to try to buy and sell at the right time by timing the market.
However, if you stay invested for years, you can potentially make a lot of money. For example, if you had initially invested in Ethereum three years ago, you would have seen returns of more than 800% since then – and that’s despite the several significant declines it’s experienced over that time.
There’s no guarantee that a crypto-currency will succeed over time. But keeping your investments long-term is one of the most effective ways to protect your money.
Are crypto-currencies right for you?
Crypto-currencies can be a fantastic long-term investment, but they are not right for everyone. Where they fit in your portfolio depends largely on your financial situation and risk tolerance.
Before investing, make sure your finances are stable and that you have a solid emergency fund. That way, if crypto-currency prices fall, it will be easier to keep your money in the market until they rise again.
Also consider how much risk you are willing to tolerate. Crypto can potentially be a lucrative investment, but it’s still speculative at this point. If it succeeds, you can make a lot of money. But if it fails, you could lose your entire investment. Before you buy, ask yourself if it’s a risk you’re willing to take.
There’s no right or wrong answer to whether it’s a good idea to buy crypto-currencies, as it depends on your particular situation. But weighing the pros and cons will make it easier for you to decide if it is right for you.