Are There Advantages to a Cryptocurrency Market Pullback?

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In spite of predictions that the cryptocurrency market is nothing more than a bubble waiting to burst, for the time being the space has refused to crash completely. Indeed, although the total market cap of the digital currency space is only a fraction of what it was just months ago, with major players like bitcoin falling by more than 50% in the past six months, it appears that there is still life in the cryptocurrency space nonetheless. The notoriously volatile market has seen its share of ups and downs, and the current pullback appears to be the largest to date. While there are obvious downsides to a pullback of this type, there may also be advantages for some investors, too.

Good Time for New Investors?

When the cryptocurrency market is at a low, that may present a unique opportunity for new investors, according to a report by ZYCrypto. Those who were reluctant to get in on BTC when it was climbing toward $20,000 may be more likely to invest when it is less than one third of that price. Particularly given the popular HODLing strategy associated with the digital currency space, investors who get in at this price point may see massive profits somewhere down the line, just as the first batch of crypto millionaires did over the last couple of years.

Repeating History?

Although the current slump is the largest in terms of total value lost for the cryptocurrency space, it is far from the only time that this type of pullback has occurred. Indeed, cryptocurrency analyst and vocal supporter Tom Lee previously predicted that bitcoin would rise significantly, even as it struggled. Eventually, it did, climbing to record highs in the final weeks of 2017. Many other analysts have joined Lee in predicting that bitcoin and other virtual currencies could soar to new heights. It’s common to see predictions of $100,000 price points or higher, some analysts even calling for those levels this year. While there are reasons to remain cautious in the face of these estimates, one can point to the fact that bitcoin has skyrocketed to $20,000 before as evidence that it can take place within the industry. That’s no guarantee of a future increase, but it does give some investors optimism.

Investing in cryptocurrencies and Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or ICOs. Since each individual’s situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns bitcoin and ripple.



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