Bitcoin investors are, finally, getting some relief.
The cryptocurrency’s price climbed this week to around $24,000 — a price investors haven’t seen since mid-June. While still a far cry from its high of $68,000 last November, this is a significant rally from even just last week, when bitcoin cost around $19,000 per coin.
Cryptocurrency is a risky and volatile asset, and its price moves are anything but predictable. While some believe that bitcoin can serve as a hedge against inflation and stock market selloffs, bitcoin’s latest price plummet shows that the digital asset is not immune to the downturn financial markets are seeing overall as investors contend with rising interest rates.
But could bitcoin’s rally mean the cryptocurrency’s price has bottomed out and is on the road to recovery? Here’s what experts say.
Bitcoin prices may have already hit bottom
The crypto market is not only dealing with changes in the Federal Reserve’s economic policy, but also an erosion of trust. In May, the crypto luna and its associated “stablecoin” terra collapsed, wiping out billions of dollars. More recently, crypto lenders like Celsius, Babel and Vauld paused users’ withdrawals amid volatile market conditions, and Celsius, Voyager Digital — another crypto company — and crypto hedge fund Three Arrows have filed for bankruptcy.
With those events still only in the recent rearview mirror — and the crypto prices being so unpredictable — it’s impossible to know where the market is heading. But some believe things are looking up.
Alex Tapscott, managing director of Ninepoint Partners’ digital asset group, says it appears markets have finally digested risks like Three Arrow’s bankruptcy and any fallout from troubled crypto lenders like Voyager.
“There is a growing sense that there’s no more ‘last shoe’ to drop and now’s a good time to add risk,” Tapscott told Money via email.
There’s a light at the end of the tunnel, he adds.
Edward Moya, senior market analyst at multi-asset broker OANDA, agrees.
“Crypto pessimism is showing some signs of exhaustion,” Moya says. “When you combine that with a pullback in the dollar and improving appetite for risky assets, bitcoin is starting to look like it might have found a bottom.”
But expect more crypto market volatility
Investors should continue to expect more volatility in the crypto market, says Adam Grealish, head of investments at financial technology company Altruist.
Bitcoin has proved it behaves like a rollercoaster again and again. For years, bitcoin was worth less than $1,000 per coin. Then in 2017, it surged to $20,000 per coin, before plummeting to less than $5,000 in 2018. It once again skyrocketed in 2021, along with a massive surge in the crypto market as a whole.
Investors should not expect the market to become completely bullish, long-time crypto investor and consultant Eloisa Marchesoni told Money via email. She adds that investors should have exit strategies that reflect their relationship to risk.
Financial advisors tend to recommend that investors with a long-term approach should keep investments in risky assets like crypto to a small fraction of their overall portfolios — think 2% to 5%. The idea is that crypto and other risky assets should be viewed as something you’ll hold over time, not something you’ll panic sell when you get worried about the price plunging.
Ben Weiss, CEO and co-founder of bitcoin ATM company CoinFlip, is optimistic about crypto’s future, but says investors really need to stick to following the fundamentals of investing as they would with stocks or bonds.
“Never invest more than you’re willing to lose,” Weiss says.
He sees people getting burned on crypto by giving into the fear of missing out. They throw money into the crypto market because of FOMO, and then wind up having to sell at a loss.
“Unless you’re willing to make a long-term bet and hold the crypto for more than a year, maybe even a couple, I think you should have a lot of caution,” Weiss adds.
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