Should You Buy Bitcoin Dip?

Nastco/Getty Images

Did you miss the opportunity to buy Bitcoin when it was first released in 2009? The first cryptocurrency, which also represented the launch of blockchain technology for decentralized finance, was launched at a price close to zero and did not reach $1 until February 2011, when it began to gain real adoption, according to SoFi.com. The price rose as high as $10, but was back to $5 per coin by the end of the year.

However, those who had invested in the early days could have seen a huge return on their investment. And had they held on until November 2021, they would have seen a single coin worth more than $68,789.

By these standards, Bitcoin is in a decline at a price just over $24,000 as of July 20, according to Coinbase.com. Although Bitcoin has started to rally in July 2022, gaining more than 15% in the last month, it is down almost 20% for the year.

This leaves investors wondering, “Should I buy the Bitcoin dip?” Let’s take a look at what’s happening with cryptocurrency in general, and Bitcoin specifically, to find out:

• Why Has Bitcoin Fallen?
• Should investors buy the dip?
• Are crypto dips something to worry about?
• Will Bitcoin Recover?

Trade Bitcoin and other cryptos in 3 minutes.

• Join the crypto exchange that has had industry-leading security from day one.
• An easy, secure way to buy and sell cryptocurrency
• Sign up for Gemini and get $7 in ETH

Why Has Bitcoin Fallen?

Bitcoin’s price has fallen as a result of a widespread crash across the crypto market. Or, it might be more accurate to say that Bitcoin’s crash fueled a crypto winter. Other coins, considered altcoins, tend to follow Bitcoin’s lead with price fluctuations.

But why has Bitcoin fallen?

In June 2022, Bitcoin fell approximately 40% since its all-time high. The crash followed a general bear market that also affected stocks, and was driven by a number of factors.

Inflation and rising interest rates create a bear market

High inflation rates due to the authorities printing and distributing money during the pandemic have caused fear in the consumer market. At the same time, the war between Russia and Ukraine triggered high fuel prices, creating more inflationary pressure across the United States. A number of other factors, including supply chain problems stemming from the pandemic, also contributed to record high inflation from late 2021 to spring 2022.

As a result, the Federal Reserve voted for a series of rapid rate hikes. This tends to make the cost of borrowing money more expensive for businesses, increasing bond yields and, as a result, reducing stock returns.

Cryptocurrencies have followed the stock market lately. But the stock market, rising interest rates and inflation aren’t the only factors that have affected Bitcoin recently.

Other factors affect crypto

The crypto market is highly volatile, with large fluctuations and the potential for large gains – and losses. Many experts blame the current crypto crash on a stablecoin – a crypto that is supposed to be directly linked to the US dollar, losing its value. When TerraUSD crashed, it sent shockwaves through the crypto investment community, reducing confidence in cryptocurrency as an investment. Experts say that fact alone makes this crypto winter different from previous crypto crashes.

Subsequently, Celsius Network, an American crypto lending company, froze withdrawals and transfers due to extreme market conditions. Bitcoin fell to less than $23,500 after the event.

Celsius Network was not the only company in the crypto industry to be affected. Major exchanges Coinbase laid off 18% of its staff and other companies announced layoffs and hiring freezes as well.

Should I Worry About Crypto Dips?

All of this news caused serious concern for investors, which of course led to further selling and further declines. But investors know that all markets experience ups and downs. Is this crypto winter different? Will Bitcoin Recover?

If you look at the long, tumultuous history of the stock market in parallel with the history of cryptocurrency, it should seem safe to say that investment will eventually rise again. In a guest post for BeInCrypto, Diego Vera of Buda.com shared the headline: “Don’t panic, we’ve been through this before.”

By tracing the history of past economic crashes and booms, from individual stocks to indices such as the Dow Jones and Nasdaq composite, he showed that markets trend up over time.

And regarding Bitcoin specifically, he pointed out, “Bitcoin has gone through several cycles in the past and has always struck back with a vengeance.” In fact, he said, 100% of people who bought and held for four years or longer saw a positive return on their investment.

Should I buy Bitcoin when it is low or high?

Obviously, to get the greatest possible return on any investment, you want to buy low and sell high. If you bought Bitcoin in 2011 when it was down to around $10 per coin, you’d still be sitting pretty right now. On the other hand, if you invested when Bitcoin was near record highs, or even when it passed $50,000 or $60,000, you’re probably looking at your portfolio right now and sweating a little.

Although Bitcoin has been on a small upswing in recent weeks, it is still a long way from the top. If you’re trying to buy the dip, you still have time.

One way to minimize risk without trying to time the market is to create an investment plan and use dollar cost averaging. Divide your total investment amount over time and buy periodically when the price of Bitcoin falls. Even if it continues to rise, you may want to stick with your investment strategy. We may be nearing the end of crypto winter. If you buy Bitcoin now for more than $20,000 and it reaches its previous highs, you will have made a return of more than 300% on your investment.

Of course, crypto is a highly volatile investment and there is no guarantee that it will recover, much less reach its previous highs. Don’t invest more than you can afford to lose, and understand that investing now and waiting for Bitcoin to recover can be stressful. Investing in a bear market requires patience and the ability to park your investments and forget about them – perhaps for years.

Will Bitcoin Recover in 2022?

If you’re looking for a short-term investment right now, Bitcoin probably isn’t the answer. Despite recent gains, analysts are holding tight to see if Bitcoin will fall below $20,000, which NextAdvisor calls “a key price point” again.

Martin Hiesboeck, head of blockchain and crypto research at Uphold, told NextAdvisor, “The market remains vulnerable and on edge, not necessarily from threats from more crypto projects going bust, but from the difficult economic situation we’re facing right now.”

Changelly.com experts believe Bitcoin could reach more than $38,000 by the fall of 2022, and potentially as high as $40,000 by the end of the year. In 2023, it may surpass previous highs.

The consensus among experts is that Bitcoin will recover, but there is always a risk involved.

Remove

If you’re looking to buy the dip of Bitcoin, now might be the time. But it’s important to make sure you don’t just jump on the bandwagon and make crypto part of a diversified portfolio.

The bear market and crypto winter create many opportunities for investors with a high risk tolerance, but it is important to invest with caution.

If you are considering cryptocurrency investments, Bitcoin may be your most recognized choice, as the coin with the highest market capitalization. It is also one of the most accessible cryptocurrencies. Bitcoin’s recently launched Lightning Network enables users of the peer-to-peer payment platform Cash App to accept payments in Bitcoin, invest a portion of their paycheck in Bitcoin, and also round up credit and debit card payments and invest the difference in Bitcoin.

Avoid penny cryptos or new coins that may not have persistence.

You can easily invest in Bitcoin on any crypto exchange, or even through P2P payment platforms such as Cash App, PayPal or Venmo.

The information is accurate as of July 20, 2022.