Crypto Dip: Is It The Right Time To Invest In Bitcoin?

Jesse
5 mn

The crypto markets are in the midst of a serious slump. While bear markets are a natural process within the economic cycles and should not be feared, many look to these times as an opportunity to accumulate cryptocurrencies in what has become known as "buying the dip".

Bitcoin currently undervalued

According to the United States investment company, JPMorgan Chase, who valued Bitcoin at $38,000, the biggest cryptocurrency is currently undervalued. With Bitcoin essentially selling at a "discount", now is a great time to establish whether you should buy the dip. 

It is believed that the crypto markets have taken a knock following the war instigated by Russia on Ukraine, the global rising inflation rates, a looming recession and the potential energy crisis that could plague Europe. Despite the global market turmoil, cryptocurrencies have proven to be incredibly resilient over the years.

There are of course a few things to consider, mainly your appetite for risk and your currency income bracket. As the golden rule goes: never invest more than you're willing to lose. Another important component to consider when deciding whether to buy the crypto dip is where you see the cryptocurrency going in the future. Do you believe in the project's fundamentals, and that its user base will continue to grow?

Despite the cryptocurrency being 70% down from its all-time high price achieved in November 2021, industry insiders remain bullish. Chris Brendler, managing director at D.A. Davidson, believes Bitcoin will be trading at $38,000 by the end of the year, and $50,000 by the end of 2023. Jurrien Timmer, director of global macro at Fidelity Investments, on the other hand, believes that it will be worth up to $100,000 in 2024. 

Is it the right time to invest in cryptocurrencies?

Since its inception over a decade ago, Bitcoin has amassed a devoted following. However, it's impossible to say now whether Bitcoin will become the world's reserve currency or a universally acknowledged store of value, like gold. Some investors are frightened by the rush of riches or downfall, while others are enthusiastic about the potential for large gains. in the crypto market.

In 2022, Bitcoin is considerably less hazardous than it was in 2012 and is widely regarded as being a revolutionary technology. In today's geopolitical climate, Bitcoin has risen to the forefront. El Salvador's decision to legalize Bitcoin as legal money in 2021 is expected to encourage other nations to do the same, however, others may choose against it out of fear of losing their fiat currency. 

Buying Bitcoin, also known as making a Bitcoin investment, like any speculative investment, involves a degree of risk. Bitcoin was the first digital asset to give rise to the contemporary crypto economy. For many years, it had a hidden following of crypto investors who believed it may eventually replace the physical monetary system. As institutions and governments seek to satisfy their customers' growing demand for exposure, Bitcoin has grown.

In order to get the most out of a Bitcoin investment, one must know when to buy. The Bitcoin market is unpredictable and may switch rapidly, with fluctuations ranging from minutes to weeks and even months. As a result, determining the right time to buy one's digital currency is crucial.

There is no such thing as a perfect time to make a crypto investment, however, buying when in a dip or a bear market allows for lower price points. 

While Bitcoin remains the biggest cryptocurrency, there are alternative investment options to consider such as Ethereum, the second biggest cryptocurrency. Ethereum was designed as a blockchain platform on which developers could create their own blockchain-based apps, known as decentralized applications (apps). When buying the dip, investors tend to stick to the top-ranked cryptocurrencies.

Buying crypto during a bear market

In the world of cryptocurrencies, a dip is when you buy something after its value has dropped. Buying a dip indicates that you have an opportunity to invest in a digital currency or token whose price has fallen, whether it be short or long-term. A bull market is typically a good time for you to sell Bitcoin, while a bear market is a good time to buy Bitcoin.

A bear market is any decline in the market price of at least 20% over a set period of time. The December 2017 Bitcoin price crash is one such example, in which the price of Bitcoin fell from $20,000 to $3,200 in just a few days. According to folklore, the term "bear" is said to derive from a bear's fighting style, which involves using its claws in a downward motion. Others speculate that it has to do with bears going into hibernation in the winter. 

Traders prefer to acquire assets during a bear market, particularly when they are at low prices. However, determining when a bear market has come to an end makes it difficult for investors to take the risk of buying a low-value cryptocurrency that may or may not recover.

When investors learn about unfavorable circumstances involving a specific cryptocurrency or asset, the market price commonly drops. As a result of the negative spiral, more people delay investing because they believe that more terrible news is on the way and that they should prepare for the worst.

This causes the market to lose more ground as a result of panic selling and contributes to the downward trend in crypto prices. Bear markets eventually subside when investors gradually regain their confidence and buy Bitcoin, ushering in a new bull cycle.

Bear markets are a great time for Bitcoin investors to take advantage of the price swings. When Bitcoin funds are low, this typically equates to lower fees on Bitcoin transactions as well, which can help to propel Bitcoin adoption.

Is now the right time for a Bitcoin investment?

We must first assess the market's overall attitude to determine whether now is a good time to invest in Bitcoin. 

According to the crypto Fear and Greed Index, it is currently positioned on "extreme fear" indicating that it is trading well below its intrinsic values.

The "Bitcoin Monthly" report issued by Ark Invest reported that 'Hodlers,' are more powerful than ever before, with 66% of Bitcoin's supply remaining unchanged for almost a year. This illustrates the market's long-term dedication.

According to Glassnode data, short-term investments dropped -35% below the breakeven price in the third quarter. These statistics were last seen in January 2022, July 2020, and March 2020. The aggregate long- and short-term holdings are still above the breakeven price, implying that widespread capitulation has not occurred.

Trading Bitcoin in the current crypto market conditions

Finally, it all boils down to whether or not you feel comfortable putting your money into the current market conditions. There is no easy solution to when is the best time to invest in Bitcoin. We are still early in the game, and Bitcoin, as well as the entire sector, has a lot of room for development. This implies that the investment opportunities for investors will likely continue. 

Disclaimer: This article is intended for communication purposes only, you should not consider any such information, opinions or other material as financial advice. This information is specific to that of the Bitcoin market and should not be translated to the traditional stock markets. The crypto market is an entirely different asset class and crypto holdings should be treated as such.

The information herein does not constitute an offer to sell or the solicitation to purchase/invest in any crypto assets and is not to be taken as a recommendation that any particular investment or trading approach is appropriate for any specific person.

There is a possibility of risk in investing in crypto assets and investors are exposed to fluctuations in the crypto asset market. This communication should be read in conjunction with Tap's Terms and Conditions.


Disclaimer: This article is intended for communication purposes only, you should not consider any such information, opinions or other material as financial advice. This communication should be read in conjunction with Tap’s Terms and Conditions.