Should You Buy Crypto Dip While Bitcoin and Ethereum Prices Are Down?
In case you didn’t know, bitcoin is on sale right now.
That’s according to two experts and a major financial institution who say bitcoin is currently undervalued at $20,000. JPMorgan Chase recently valued the coin at $38,000 – about 90% more than today’s price.
Bitcoin could be worth up to $100,000 in two years, and its market cap is currently between $40,000 and $50,000, according to Jurrien Timmer, director of global macro at Fidelity Investments. Chris Brendler, managing director and senior market analyst at DA Davidson, expects bitcoin to return to nearly $38,000 by the end of this year and $50,000 by the end of 2023.
“Bitcoin is a unique animal because it’s hard to say exactly what it’s worth,” says Brendler. “It tends to have these exaggerated moves to the upside when people just buy because they want it to go up in value. When it starts to go down, they get out. But the price of bitcoin will grow higher than it is in day for the next few years.”
So, what does this mean for the crypto-curious who are potentially looking at bitcoin as an investment? Is now a good time to take advantage of the crypto market “sale” and invest?
The short-term risk of investing in crypto may be worth its long-term potential rewards, according to some financial experts — as long as it doesn’t hold you back from meeting your other financial obligations and you can clarify your long-term goals in advance.
Here’s what you need to know before investing in bitcoin and other cryptocurrencies amid the downturn:
What is happening to crypto prices?
Bitcoin, ethereum and crypto prices have crashed along with the stock market in recent months as investors grapple with continued rising inflation, Russia’s war on Ukraine, rising interest rates and fears of a recession.
Bitcoin on Thursday plunged below $19,000, down nearly 70% from its all-time high of $69,000 in November 2021. Ethereum, meanwhile, fell to nearly $1,000 on Thursday for the second time in June as the network prepares for a massive and long-planned upgrade.
The crypto market crash in June came after the latest inflation report showed still high prices for consumers and the Federal Reserve raised its benchmark interest rate by 75 basis points – the biggest increase in nearly three decades. About $2 trillion was wiped from the crypto market, and the S&P fell into a bear market.
Bitcoin saw a nearly 40% drop in June, hitting a low below $18,000. Ethereum’s price fell by nearly 50% in June, going as low as around $900 at one point.
Still, some experts believe that the prices of bitcoin and ethereum could fall even lower. According to Kavita Gupta, venture capitalist and founder of Delta Blockchain Fund, it could be the beginning of a “crypto winter,” an extended period when prices fall and remain low, as they did between early 2018 and mid-2020. Gupta says based on her technical analysis of the market that bitcoin could fall to $14,000 and ethereum could fall to $500 in the next weeks or months.
Should you buy dip? How to be smart when investing in crypto
Experts say now may be a good time to enter the crypto market while prices are low, but only after you’ve assessed your risk tolerance and prioritized other aspects of your finances, such as saving for an emergency, paying off high-interest debt, and invest in a traditional retirement account such as a 401(k).
If there’s one thing you should know about investing in cryptocurrency, it’s that it’s volatile and highly unpredictable. Values fluctuate by the minute driven by speculation, hype and the vagaries of broader economic conditions. Potential investors looking to buy in now while the market is down should understand that price swings are par for the course, and be prepared for prices to fall even further. If you can’t stand sharp market swings, you shouldn’t invest in crypto.
As for your overall crypto investment strategy, only put in what you are comfortable losing. Experts generally recommend investing no more than 5% of your portfolio in crypto. Bitcoin and ethereum are the two cryptocurrencies that represent the best starting point for new investors, according to experts and NextAdvisor’s Investability Score.
Bitcoin has the highest score among all cryptocurrencies, with Ethereum right behind. Here’s how bitcoin and etheruem compare to the rest of the cryptocurrencies that are consistently in the top 10 by market capitalization, excluding stablecoins:
