The value of digital coins has been declining in recent weeks decreased dramatically, what should you do as a crypto investor? Is now a good time to get in or should you wait? And what are useful tactics if you want to invest in cryptos?
Bitcoin’s value dropped from $31,000 to less than $20,000 in a week. It was the first time in a year and a half that the largest crypto coin fewer was worth more than $20,000. The prices of other cryptocurrencies also turn red on the stock exchange.
Investor and experience expert Janneke van den Brink is not surprised that the crypto coins have fallen hard. “The situation was inevitable. There is a debt crisis, high inflation and little confidence in the economy. This is of all times. A price can never just go up.”
Investment expert Jim Tehupuring sees the price decline as a good warning. “The price of cryptos is purely about supply and demand.” According to him, investing in cryptos falls under speculation. “The value can rise quickly, but it can also fall sharply. You now mainly see that you can lose hard money with it. Realistic expectations are therefore necessary.”
Join now or not?
Is it a good time to buy crypto coins now that the prices have slumped? “A declining market can be a good time to get in,” says Van den Brink. “You can buy cheaper in the dip. The statement ‘buy the dip’ is often heard in the world of cryptocurrency. This means that it is best to buy cryptos when the price is significantly low.”
“So you don’t have to be afraid of a falling stock market, but you can also see it as an opportunity. Everything is on sale. It is good to remember that there is always a risk that the price will fall further.”
Van den Brink tries to spread the risks as much as possible. “Never bet on one horse, this way you limit loss. By spreading over different cryptocurrencies I can better absorb the blows of price drops.”
You can invest at a fixed time every month
She also advises investors to use the dollar-cost-averaging strategy. “This means that you invest the same amount every month on a fixed day, regardless of the price of the product or what happens on the stock exchange,” she says. “This means that you buy in both falls and rises and you benefit from the average price increase in the long run.”
“You get the emotion out of it because you don’t let rapid price rises or falls drive you crazy.”
Janneke van den Brink, investor
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With this strategy you invest regularly and spread out, explains Van den Brink. “It’s a long-term view and that always works best when investing. Also when investing in cryptos. You get the emotion out of it, because you don’t get fooled by rapid price rises or falls,” she adds. “You no longer have to time the market (an investment strategy where you try to buy and sell at the right time, ed.).”
She does say that it is important to investigate the function of a crypto project. “We know that bitcoin is used as an alternative means of payment. But there are also many cryptos, also called shitcoins mentioned, which rely purely on hype and sentiment. Then you have a problem if the prices plummet.”
‘You have to invest serious time to understand the cryptos’
Stock commentator Tehupuring wants to add that it is good to know that there is no supervision of crypto companies. “The traditional stock exchange is controlled by regulators such as the Netherlands Authority for the Financial Markets and De Nederlandsche Bank. If a bank or investment firm goes bankrupt, investors are protected.”
“And that is not the case for cryptos,” he continues. “There is no control on who can make a crypto on those platforms. And there is no guarantee about your money if they go bankrupt. This is an extra risk that you take.” He therefore advises beginners not to invest in cryptos. “You have to invest serious time to understand what all those cryptocurrencies are. It’s better to go for common stocks, for example in a fund. It’s a lot safer and more stable if you ask me.”
