Last week was a field day for those who eagerly waited for the ‘Bitcoin bubble’ to burst. In an overnight, the digital asset plummeted from a record high of $20,000 to nearly $10,000. Several reasons are available for the decline, but is this the right time to buy bitcoin?
A sharp drop in the price of bitcoin often scares novice investors, who rush to sell off their investments for fear of further losses. Some investors also exit the market with the conclusion that the cryptocurrency has proven too risky. However, for seasoned and market-savvy investors, a drop in the price of bitcoin or any other cryptocurrency for that matter is an excellent opportunity to buy more of the asset.
According to analysts, bitcoin’s price is known to be very volatile, which makes it difficult for analysts to predict what’s going to happen next. For instance, just two days ago, the digital currency dropped in value to nearly $10,000. Even so, in less than 24 hours, it recovered from the shock to a high of $15,000.
ETX Capital senior analyst Neil Wilson says, Has the bubble finally popped? It’s hard to see the bell tolling just yet. Large price swings have become so normal that it’s hard to decide—we can easily see this market bounce back in very short order.”
Why Should You Buy Bitcoin When the Price Drops?
For investors who appreciate the long-term value of bitcoin, the drop in price is a chance to acquire more of the cryptocurrency. It enables them to add to their holdings at a less costly price than if they purchased in a bull market.
If you believe in the strength and ability of bitcoin to change your life and the world, then you should cash in on every drop in price as an opportunity to buy bitcoin. Here are three reasons for buying when the price drops:
1. Dollar-cost Averaging
Investors in digital currency use the dollar-cost averaging strategy to buy more digital assets for less when the price falls. Dollar-cost averaging is a market strategy that enables investors and traders to buy a fixed amount of an asset on a weekly or monthly basis regardless of the market price at that particular time. In the end, the investor would be able to buy more of the asset during price drops and less of the same when the price goes up, but with the same amount of money. With the recent price drop, it is one of the best opportunities to buy bitcoin than ever.
2. One-off Investment Opportunity
In addition to the dollar-cost averaging benefit, you can use the price drop as an opportunity to make a big, one-off investment in the digital currency for a possible long-term investment. This option is suitable for investors who do not have much time to spend following the market trends or to actively manage their investments. Once bought, you can store your asset in a digital wallet until you decide to exchange or to invest.
3. Bitcoin Has a Potential for Future Growth
With each drop in bitcoin price, opponents of the digital currency claim a possible end of the ‘bitcoin bubble’ hype. However, as history puts it, bitcoin has recovered from past price blows with a much bigger boom. Even with the price drop, many investors and analysts believe that the world’s most popular cryptocurrency will hit a record high of $50,000 by the end of 2018.
In the words of cryptocurrency investor Oliver Isaacs, “Currently if you invest in bitcoin you can make a significant amount of money, but similar to investing in the stock market it is important to be cautious and avoid putting all your eggs in one basket,” Oliver spoke to Express.co.uk.
Possible Reasons for the Recent Decline
Investors and analysts have provided various explanations for the recent drop in bitcoin price, which dimmed the aspirations of many aspiring and existing investors. All the same, despite the drop that slashed nearly 30 percent of bitcoin’s market value, there are signs of a possible upswing that have left many people wondering what could be the cause of the massive drop in bitcoin price. Here are top 3 possible explanations:
With the December festivities in sight, many investors usually take a break from business and withdraw their annual gains. Investors convert their earnings into cash in readiness for the everyday transactions that cryptocurrency might not favor. Even with the soaring popularity of the blockchain technology and cryptocurrency, the average buyer still prefers cash to the internet money. With only a few days before Christmas, the decline came at a time when investors offload the earnings to the market in exchange for cash.
The Bitcoin Cash (BCH) Confusion
Recently, Coinbase announced its support for the Bitcoin Cash (BCH), a step that has led to internal wrangles within the Bitcoin community. Bitcoin Cash is a hard fork of the original Bitcoin. With two camps of the same cryptocurrency, many people are left wondering which one is the true Bitcoin. There is a heated debate around the issue, followed by the recent surging price of BCH and a sharp decline of BTC price. The confusion around the two crypto currencies could have kept many traders and investors from participation.
Recently, Bloomberg revealed that only a group of a thousand investors own up to 40 percent of all circulating Bitcoin. This could have triggered a possibility of a foul play. With nearly half of the circulating Bitcoin under their control, the market giants could simply tilt the market to their favor. It could well be possible to sell their investments at record highs, drop the market to record lows, and then buy back at a lower cost. Whether this is true or not, time will tell.
Finally, but on a very important note, if you are a firm believer in the power of Bitcoin and in the price predictions by experts, then you should not be spooked by a price decline. Instead, you should view the situation as an opportunity to buy bitcoin at a cheaper cost and to build your investment portfolio.
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Disclosure: The author is a crypto markets writer. Neither the author nor CoinStaker endorses participation in any token sale or cryptocurrency investment, all of which have a significant inherent risk. Seek advice from a financial advisor and do your own due diligence before considering an investment.
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