Here’s Why People Are Still Investing In Cryptocurrency Despite The Plunge
The world of cryptocurrency has seen many ups and downs in the past two years. Due to the pandemic and the subsequent world events, cryptocurrencies have seen their best and their worst and many big players have taken the plunge. Despite this, crypto investment is still going strong and some people advocate that this turbulent period will be over soon, and is in fact a good time to buy the dip. But is that really true? Let’s find out.
What is “the dip”?
“Buy the dip” is an investment strategy that is predicated on the notion that price declines are only transient anomalies that will eventually be corrected. Buyers who wait for prices to fall further in the aim of getting a better deal and profiting when prices recover are referred to as “dip buyers.” The cryptocurrency markets are very volatile, making the crypto investment at any price is dangerous, let alone during a drop that has the potential to become a long-term trend. Prices may rise to levels seen in the past, but there is also the possibility that they may fall much farther, putting your investment in the red. If what happened in the past is any indication of what will happen in the future, the recent price drop (or crash, depending on your point of view) may experience a similar recovery to the one that occurred last year, when prices dropped to levels comparable to those seen today before recovering to levels seen before the drop and even reaching a peak in the fall. However, it is possible that they will not. To this point, the price of Bitcoin in particular has shown a degree of seasonality, with prices seeming to drop in value throughout the spring months to a smaller or larger amount before rebounding in the early summer months. However, just as with any other kind of investment, and especially in the volatile realm of cryptocurrencies, there is no guarantee that previous success will be repeated in the future.
So before investing in any cryptocurrency, make sure you learn crypto and understand technicalities and all the possible scenarios and base your investment decisions on them.
Is Investing In Crypto Still Worth It?
Since cryptocurrency is ever changing, more so than stock markets, cryptocurrency exchanges are susceptible to being hacked and becoming targets of various types of criminal activities. Because investors who have had their digital currencies stolen have suffered significant losses as a result of security breaches, a growing number of cryptocurrency exchanges and third-party insurers are beginning to provide insurance against hackers.
When you store cryptocurrencies on a centralized exchange, you give up some of the control you would otherwise have over your assets. Either a government may request that an exchange freeze your assets, or the exchange itself could fail, leaving you with no way to get your money back even if the government made the request. The offline “cold storage” solutions offered by hardware wallets, for example, are preferred by certain owners of cryptocurrencies; nonetheless, cold storage is not without its share of complications. The possibility of losing your private key is the most significant danger; without a key, it will be difficult for you to access your money.
Additionally, there is no assurance that the cryptocurrency venture you invest in will be successful. There are dozens of blockchain initiatives now under development, and the competition is tremendous. Many of these businesses are nothing more than frauds. Only a tiny fraction of the cryptocurrency initiatives that are launched will succeed in the long run.
It is also possible that regulators may clamp down on the whole cryptocurrency business, which is particularly likely if governments see cryptocurrencies more as a potential risk than as an advanced technological development.
The cutting-edge computer technology that underpins bitcoin also makes the investment more precarious for users. A significant portion of the technology is still in the process of being created and has not yet been thoroughly tested in situations that take place in the real world.
Because of the tremendous liquidity that is connected with cryptocurrency, it is an excellent investment vehicle for those who are looking for profits in the short term. Due to its nature, cryptocurrency investments can go either way and as an investor, fully knowing and understanding that is crucial.