(Katie Brockman)
The cryptocurrency has had a tough year so far. Major cryptocurrencies have seen their prices fall over the past two months, and the crypto market as a whole has lost nearly $1 trillion since its peak in mid-November.
While the price drop can be concerning, it is also a fantastic opportunity to “buy the dip”. Expensive cryptocurrencies like Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO:ETH) are basically on sale right now.
Bitcoin is currently priced at $43,000 per token, up from nearly $70,000 in November. Similarly, Ethereum is priced around $3,300 per token, a steep drop from its high of nearly $4,900 per token a few months ago.
If you are considering buying crypto, now is one of the most affordable times to invest. But does that mean it’s a smart investment? Here’s what you need to know.
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Is crypto a good investment right now?
In general, it can be a good idea to stock up on stocks during market declines. Stocks tend to be more affordable when the market is down, but there is a good chance that prices will rebound once the market recovers.
Cryptocurrency is a bit different, however, as it is still highly speculative.
Stocks have a long history of growth over time. As long as you do your research and choose the right investments, your stocks are likely to recover from declines and generate positive average returns over time.
With crypto, however, there is no guarantee that it will be successful in the long term. Although major cryptocurrencies are developing more utility, the bulk of their growth is still based on their potential real-world uses. In other words, while there is a chance that crypto could explode and change society as we know it, there is also a chance that it will fail. And for the moment, no one knows what will happen.
Should you invest in cryptocurrency?
Crypto is not necessarily a bad investment. It’s risky, so make sure you know what you’re getting into before you buy.
To decide if crypto is right for you, consider your risk tolerance. The Bitcoin price has fallen almost 37% since mid-November, and it has lost over 80% of its value in the past. If you know that this level of volatility will make you lose sleep at night, crypto may not be the right investment for you.
It is also important to think about your overall financial situation before investing. As with any investment, it’s best to keep a long-term perspective. Be prepared to keep your money invested for at least a few years, if not decades. Also, don’t invest money you can’t afford to lose, and make sure the rest of your portfolio is well-diversified.
Finally, do your best to keep expectations realistic when investing in crypto. There is no shortage of stories of people who have made millions investing in cryptocurrency, but these cases are the exception rather than the rule.
Although you probably won’t become a millionaire overnight, it is possible to make money with crypto. It’s a risky investment, so don’t rush into buying just because it’s more affordable right now. If you have a higher volatility tolerance and can afford to invest, this might be the right opportunity to buy. Otherwise, better to wait.
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Katie Brockman owns Bitcoin and Ethereum. The Motley Fool owns and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
