Market update: The bears are back
It's an exciting time for the crypto markets as the industry heads into a bear market. We explain what this means for your portfolio.
There’s never a boring day in the cryptocurrency markets. In the first quarter of 2022, prices were quite stable, but after a multi-year bull run, many analysts think that we could be in for a period of lower prices.
Bitcoin used to trade for a few cents in its earliest days, but it also hit an all time high of over €57,000 in November 2021. So investors are split into camps that think assets like Bitcoin will be worth more in future (bulls) or those that think it will be worth less (bears). Now, we are seeing signs that bears are selling more than bulls are buying.
It’s quite possible that €28,000 is a psychological barrier for Bitcoin and if we see prices dip below this figure, they could drop by another 50% as bears sell off their assets. That’s not necessarily bad news though. If you believe that Bitcoin is valuable and its price will increase long term, then there could be some bargains for your portfolio in the near future.
Not so Terra firma
Altcoins, a name for pretty much all small market cap cryptocurrencies, have had a rough couple of months, with many tokens experiencing price falls up to 80%. As a result, many investors that don’t have a plan resort to panic selling. One coin, however, had a spectacular implosion that could have a big impact on the whole sector.
TerraUSD, a stablecoin which is supposed to always be worth $1, suddenly plummeted in value. This caused a big ripple across the market and it’s likely we won’t know the true effect for a little while. Either way, it is useful to remember that some cryptocurrency projects are experiments and if the market decides they should fail, then it can be a harsh lesson for everyone involved.
What does this mean for my portfolio?
There’s still a lot of money sloshing around the markets, but if we look at the last 6 months, we can see a clear downward trend.
Investing in crypto is more fast-paced than in traditional markets, but there are some lessons that are true in both. The most important of these is that investing is all about the long game. That means having a plan, working out how much you can afford to invest, as well as when to buy and sell.
Understanding that investing is a long term activity doesn’t mean panic selling before you lose money, it means taking a back seat and trusting that your investments will grow over decades, not just from one price rally to another.
If we’re about to enter a full on bear market, where we see a prolonged period of low prices across the market, then it is definitely time to make sure your plans are in order and have a long term game plan. Be cautious about any big investments but remember that Ether and Bitcoin have very strong price performance over longer periods of time. Your first bear market is an important experience on your journey to becoming a mature trader, so keep your eyes peeled and your faith strong.
This blog constitutes information of a general nature and does not address the circumstances of any particular individual or entity. Nothing in this blog constitutes investment advice or any other professional and/or financial advice, nor does any information in this blog constitute a comprehensive or complete statement of the matters included therein.
Nothing in this blog constitutes or shall be read as any recommendation to invest in cryptocurrencies or investment products. Each reader alone assumes the sole responsibility for evaluating the information as well as the benefits and risks associated with the use of any information before making decisions based on such information.