The cryptocurrency market is no stranger to volatility, but the past year has been particularly tough. Despite a slight rally over the past several weeks, the largest cryptocurrencies are still significantly lower than their all-time highs.
price Ethereum (ETH -0.85%)for example, is down nearly 66% since its peak in November. Bitcoin (BTC 2.26%) It fell more than 71% from its height, and Solana (Sol 6.49%) It fell by a whopping 86%.
With some investors worried that a market crash may be looming, is now the right time to invest in cryptocurrencies? It depends.
Should you stop investing now?
In some cases, pressure to stop investing can be a smart move – especially if money is tight.
Downturns in the market are one of the worst opportunities to sell your investments because the prices are much lower. If you initially invested in cryptocurrencies several months ago and sell now, you will sell at a huge discount and keep those losses.
No one knows exactly where crypto is heading in the coming months. But if you can’t leave your money invested for at least a year or two, it may be best to avoid investing for now. If cryptocurrency prices keep dropping and you suddenly realize that you need this money, it can be costly to sell your investment.
The issue of continuing to invest
If you have a solid stock of savings and can keep investing, now may actually be a great buying opportunity.
Cryptocurrency is a very expensive investment, and buying at the moment means that you will have the opportunity to invest at a fraction of the cost. Bitcoin, for example, cost roughly $70,000 per token at its peak, and is currently priced at around $21,000 per token. And Ethereum, which reached an all-time high at around $4,800 per token, now costs around $1,700 per token.
But the key is to hold your investments for the long term. Cryptocurrencies can be very volatile, and trying to buy and sell at exactly the right time by timing the market is almost impossible.
If you stay invested for years, you are likely to make a lot of money. For example, if you had initially invested in Ethereum three years ago, you would have seen returns of over 800% since then – and that’s despite the many downturns you’ve experienced during that time.
There are no guarantees that any cryptocurrency will work over time. But holding your investments for the long term is one of the most effective ways to keep your money safer.
Is Cryptocurrency Right for You?
Crypto can be a great long-term investment, but it’s not right for everyone. Whether it belongs in your portfolio depends largely on your financial situation and risk tolerance.
Before you invest, double-check that your funds are stable and that you have a sound emergency fund. This way, if the cryptocurrency price drops, it will be easier to keep your money in the market until it recovers.
Also, consider how much risk you are willing to take. Crypto can be a lucrative investment, but it is still speculative at the moment. If you succeed, you can earn a lot of money. But if you fail, you may lose your entire investment. Before you buy, consider whether this is a risk you are willing to take.
There is no right or wrong answer as to whether buying cryptocurrency is a smart idea, as it will depend on your unique situation. But weighing the pros and cons can make it easier to decide if it’s right for you.
Katie Brockman He has positions in Bitcoin and Ethereum. Motley Fool has positions in and recommends Bitcoin, Ethereum, and Solana. Motley Fool has a disclosure policy.