Buy Bitcoin on the Dip? 3 things the smartest investors know about crypto

Bitcoin (BTC -2.40%) is the giant in the world of cryptocurrency. It is the first player and the biggest. You can use it to make payments to more than 15,000 businesses worldwide. In fact, two countries – El Salvador and the Central African Republic – recognize it as legal tender. Investors flocked to Bitcoin last year as the entire cryptocurrency market soared past $3 trillion in market capitalization.

However, this year’s financial woes have pushed investors into the safest of assets. And this means that cryptocurrencies have suffered. You might be thinking about buying Bitcoin on the dip right now, but before you do, check out these three things the smartest investors know about crypto.

1. Today’s financial problems don’t change crypto history

Higher inflation and other economic problems have hurt people’s wallets and companies’ earnings. The current context has also weighed on the demand for cryptocurrency.

During these times, investors shy away from risky assets. Why is crypto risky? Because it is quite new. And we don’t know exactly what the landscape will look like a few years from now.

But today’s economic situation does not change the developments taking place in the crypto world. For example, developers continue to add projects on blockchains such as Ethereum (ETH -3.59%). And people continue to pay with Bitcoin or use it to store value.

These platforms may not be as popular as investments at the moment, but the economic context doesn’t hurt their use cases or potential to redefine how business is done. So when these external issues go away, cryptocurrencies can reverse pretty quickly.

2. Regulation may be on the way — but it is not necessarily bad

The idea of ​​cryptocurrency regulation may make some investors cringe. The fear is that it could destroy the freedom the crypto market promises.

And regulation may come closer. This autumn, the White House released a framework for the responsible development of digital assets. The document contains various points – including potential attempts to promote stability in the market and ideas to combat illegal activities.

Of course, if the government goes too far in certain areas, any regulation could hurt cryptocurrency demand. But it is important to remember that different experts are likely to be involved in discussions. And future regulation may not result in extreme or destructive decisions.

Instead, regulation can actually set guidelines that reassure investors who have been hesitant to invest in cryptocurrency. A safer market does not necessarily mean a market with less freedom or opportunity for gains. So potential regulation could be positive – and attract more investors to the market.

3. There is a way to safely invest in crypto right now

As mentioned, cryptocurrency is among the riskiest assets. But this does not mean that a portfolio that includes crypto is high risk – and that one that does not is a safe bet. If you want to enter this innovative market while prices are down, there is a way to do it safely.

First, consider the oldest and strongest players: Bitcoin and Ethereum. They have each lost more than 65% this year. But since inception, they have climbed more than 5,000% and 38,000% respectively. And as we can see in the chart, they’ve gone through some tough times lately – and bounced back.

Bitcoin price data from YCharts

You have the option to buy fractions of these players. So you don’t need to make big investments. To safely invest in these or other crypto players, do not invest more than you can afford to lose.

Also, balance your holdings with other assets that are considered safer – such as stocks known for their dividend growth or stocks in consumer goods or pharmaceutical companies that have solid track records.

This type of strategy will allow you to enter a market that can provide huge rewards in the long term. In the meantime, you won’t lose any sleep.