Drawdowns provide good entry levels for exposure, but we would not go max long in an environment of rising central bank rates and falling global growth momentum. Our video on bitcoin fundamentals can help you understand how bitcoin prices fluctuate and how to assess trends in important bitcoin metrics. However, even the recent FTX chaos fails to detract from the longer-term decline in crypto markets. Since its all-time high of $68,789 on 12 November 2021, bitcoin has fallen 65%. Likewise, ethereum – the other major player in the crypto space – is down 65% from its 2021 high of $4,891. These declines follow the broader selloff of 2022, which extended across equities, bonds, and real estate.
Overall, purchasing coins during a project’s presale can be an excellent way to invest in promising cryptocurrencies and potentially reap great returns over time. Furthermore, their numerous use cases and strong community support also recommend them as solid investment opportunities for those looking to capitalise on the continued momentum of this exciting new technology. In short, while new cryptocurrencies may offer higher returns in good times, experienced projects like bitcoin offer greater stability in the long run.
Complex cryptocurrency based financial products
This is why so many crypto investors advocate holding onto bitcoin and other cryptocurrencies for as long as possible, in case their value continues to rise. When you buy cryptocurrencies, you will usually hold them in a digital wallet – in essence, an app that works like a bank account. The idea behind cryptocurrency is that people can transfer value online outside of the control of governments or central banks. The easiest way to think of the Ethereum network is as a secure database that can be accessed by anyone.
One way to cope with the volatility is to use dollar-https://www.tokenexus.com/ averaging. Dollar-cost averaging is a strategy where you divide the total amount you want to invest across periodic purchases of the target asset. It simply means that you would invest the same number of dollars each month or quarter, regardless of market trends. Your exposure to ethereum needs to be appropriately sized so that you can survive 50% to 80% drawdowns. Crypto markets almost looked like they had partial immunity from the tech sell-off and growing risk aversion. The relative bullishness in mid-January was simply the calm before the macro storm resumed.
While it is unlikely that cryptocurrency investment ideas will suffer a complete loss of value, investors must be prepared to suffer drawdowns of between 50% and 80%. We recommend small allocations and diversification of your portfolio. You also need access to a crypto wallet to store bitcoin and other cryptocurrencies.