Those who have invested in cryptocurrency for diverse reasons, be it the fact that the halving is approaching or that the prices’ trajectory started to rise, have likely had second thoughts, given the assets’ value movement in August. After several months of stability in the market that saw the price of�Bitcoin�break its $30,000 psychological limit in July, and move in this range for the better part of the month, the values of every asset started to fall. Over several days, Bitcoin lost around 12% of its value.
It is nothing out of the norm for cryptocurrency prices to tremble after shock waves like those caused by the most recent events hit the market. The collapse of major banks and exchanges of last year, such as FTX and Silvergate triggered similar reactions. Yet, two months ago, Bitcoin rose from the ashes and traded at $30,000 � a limit unreached in more than a year.
Bitcoin showed resilience over time, and the highly impactful nature of digital currency means that today’s prices don’t mirror tomorrow’s values. Before they take the plunge to add Bitcoin, Ethereum, or other well-performing cryptocurrencies to their portfolio, several critical questions rest on investors’ minds. So, let’s answer them and see what the best cryptocurrencies have been up to.��
Is this the biggest fall in the cryptocurrency market?
Drawing on past performance examples to assess situations and determine whether there’s hope at the end of the tunnel is commonplace. As a newbie to crypto, you may wonder if cryptocurrencies have ever gone through similar difficulties. And the answer is yes; this is not the first time that cryptocurrencies have crashed. In December 2017, for instance, it traded at around $20,000, only to plunge to under $3,500 the following year. Following the months that came, it started to grow and reached around $69,000 two years ago, in November. It struggled to hit this ATM again but couldn’t so far. However, the crypto community is optimistic, as these assets always have a way of bouncing back.
What risks am I exposing myself to by buying crypto right now?
The first thing to keep in mind when accumulating Bitcoin or any other cryptocurrency is that the effects of crypto market downturns may take months or even years to dissolve. The long recovery time may frustrate some investors, so it’s essential to stick to your long-term strategy and not give in to any impulsive reactions you may have. Successful investors hold on to their assets until their prices improve enough to generate e substantial profit, then sell.
Furthermore, many take the “buy the dip” mantra too seriously when the situation is slightly more nuanced. Cryptocurrency crashes translate to low prices, making investments in the area tempting. But there are many other factors to establish before starting this journey, like how well you can resist the pressure to sell if other events play with crypto prices in the future. You can expect the prices to continue falling after the shockwaves are generated. This outcome is typical, especially if the incidents impacted other currencies or exchanges.
Crypto can fall much faster than other conventional assets because these markets lack circuit breakers to put trading on pause until prices recover.
How has SpaceX’s sell-off of Bitcoin dragged down the prices?
Among the many reasons the crypto community considers to be behind the downfall is the news that Elon Musk’s Space X disposed of some of the company’s investments in Bitcoin, worth around $373 million. However, the number of investors and experts arguing that the wording is vague and leads to potential misconceptions is not to be brushed aside. Many believe the communication doesn’t indicate whether the company sold that quantity of Bitcoin or if they still possess some of it. Nevertheless, regardless of where the truth lies, the declaration was enough to trigger feelings of FUD (fear, uncertainty, and doubt) among investors worldwide and stroke their concerns, causing them to offer their Bitcoins for sale. Feelings of doubt in the crypto market naturally translate to price regressions. Meanwhile, the same year, another company owned by Elon Musk, Tesla, sold off 75% of its Bitcoin holdings.
Why are investors preparing for April 2024?
Whether you�re a novice or a seasoned investor in the crypto sector, and despite the consistency with which you keep updated with the upcoming events and news in this regard, you�ve likely come across one of these two milestones: �April of the next year� or �the halving�. Typically, future-oriented investors, speculators, or opportunists manifest heightened months ahead of Bitcoin�s halvings that take the form of higher demand and more significant investments in the asset.
Historically, Bitcoin�s halvings, the process in which the reward received by miners is cut in half as per Satoshi Nakamoto�s outlined recompense reduction in the project�s white paper, have generated substantial profits for those who accumulated Bitcoin in advance. The gains were not registered the day or moments before the halving, but rather, the asset�s price showed improvements a long time before the milestone�s completion. Similarly, and unsurprisingly, Bitcoin is also anticipated to boost in value several months ahead of the highly-awaited reward splitting, with experts predicting a price surge that would make it reach a staggering $100,000. However, this escalation is not expected to achieve this unprecedented performance until this episode is finalized.
The Stock-to-Flow model, a widespread method of forecasting the asset�s price, points to its heightened scarcity post-halving and leads analysts to believe in the astronomical price rise previously discussed. Other connoisseurs in the crypto realm, such as the known author of the best-seller �Rich Dad Poor Dad� Robert Kiyosaki, also remain bullish on the overvaluation of the reigning digital currency.�
The general investor sentiment is optimistic about the halving scheduled for April 2024. However, it�s safe to say that past performances and assumed predictions are not enough to firmly determine the faith of the asset in your portfolio. Using common sense and carefully assessing your risk tolerance are essential factors when deciding whether or how much BTC you�re comfortable accommodating in your portfolio.
Closing thoughts
When it comes to different events’ effects on cryptocurrencies, it’s paramount to recognize how various factors impact the market’s dynamics and trajectory. For now, the crypto community awaits the SEC’s decision on whether spot Bitcoin ETFs will be approved. The government agency postponed a pronouncement on the applications’ permission to launch in the early months of 2024.�
Staying up with the news is the most effective way to understand the changing dynamics in the market.�
