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Reasons for BTC Dip and questions to ask yourself before investing

For the last couple of weeks, the crypto market has been experiencing a significant BTC dip. Prices of major currencies, including Bitcoin (BTC), Ethereum, and Dogecoin, have taken a severe plunge. This situation has split the market into two: investors rushing to sell off their assets and those holding onto their investment with great hopes for the future. If you’ve been eyeing the crypto industry, this may be the best time for you to buy cryptocurrencies because of the low prices.

This is in line with the best investment principles of investing when prices of an asset are scarce and selling once the value has gone up. Keep reading to understanding how you can take advantage of the current BTC situation to make wise investment decisions.

Understanding Crypto Dip

Recently, prices of significant crypto assets have crashed and sent shockwaves in the whole ecosystem. Multiple factors might have caused this situation. The main ones are as follows:

  • High Carbon Footprint: Elon Musk, the CEO of Tesla, has been a BTC enthusiast. However, recently, he tweeted and said that his company had banned transactions via BTC because of the high carbon footprint and the massive amount of power that the mining process gobbles up.
  • New Regulations in China: China developed laws that banned transactions through BTC in financial institutions. This legislation caused a dip in BTC’s price from its highs of $60000 to lows of $30,000.
  • Jitters about US regulation: An announcement by the US treasury to introduce stringent reforms against crypto tax dodging has catalyzed the current situation. Furthermore, Fed is signaling expanding regulations on BTC, which also hurt the crypto market.

A long-term view of the crypto market

The crypto market is relatively new and lacks sufficient data that can help investors to establish trends. As the first coin, BTC is over a decade old and has had some dips in the past. The good news is that the crypto emerges from the drops and increases its value fast. So, an intelligent investor can take advantage of the current slump to buy more coins. Also, here is how the BTC enthusiasts think about the future of the crypto:

  • BTC has gone Mainstream: Currently, BTC enjoys considerable adoption as a crypto asset class worldwide. Multitudes of individuals in different countries trade it. And those who lack knowledge or time to sell can also participate through Quantum AI. So, whether you’re a beginner or a veteran, this tool can help you meet your BTC investment goals. Famous retailers like Starbucks, Amazon, and Expedia are now approving BTC payments. Many countries are also figuring out how to develop regulations that can see the mainstreaming of BTC.
  • Emerging multiple institutional investors: Famous brands like MicroStrategy, Square Inc., and Tesla hold significant BTC assets. Already, MicroStrategy has announced that it will purchase 13 005 bitcoins worth $489 million in cash. Other vital institutions like Morgan Stanley and Goldman Sachs intend to launch crypto funds for their clients.
  • BTC hedges against inflation: BTC’s supply is capped at 21 million, and some see it as a better hedge against inflation. Significant events like Covid-19 may lead to inflation as governments print more currencies to assist their economies. While this move may provide some temporary relief, it has a far-reaching adverse effect on people’s investments due to inflation. The good news is that BTC’s encoded principle capped its supply, and no one can change it.
  • Faster payment: businesspeople like payment solutions that are prompt and hassle-free. Traditional methods are slow as they require third-party approvals.BTC has a brighter future because it enables faster payments across boundaries. Additionally, the transactions fees are minimal compared to standard charges.

Questions to ask yourself before investing in crypto

Now that you’ve got some basic information about BTC, the next move is to buy the asset. However, before you take this step, it’s essential to ask yourself the following questions:

Why do you want to buy BTC?

Before buying any crypto asset, it’s critical to evaluate your motivation in buying it. It’s one thing to buy BTC if you think it’s in line with your overall investment tactic. Or, you might want to buy it because the move enables you to have a more diversified investment portfolio. Suffice to say, you should have a specific reason you’re investing in the crypto industry. Avoid the temptation of buying BTC without a specific reason.

 What’s your investment strategy?

Plunging into the crypto market without a tactic is like going to war without weapons. A strategy helps you determine what you need in the crypto market and the best method of obtaining it. Some investors can use a long-term strategy, while others can go for a short-term tactic.

While some investors want to buy and hold BTC for a long time, some want to trade it quickly to earn some money. Investors who purchase and have BTC for a long time wish to benefit from the crypto in the future once its value shoots. The long-term strategy is the best for beginners in the crypto market. So, when BTC has a dip, you can buy it at a low price and hold it for long. Once the price shoots, sell it and make a kill.

Do you understand the risks involved?

All investments have risks, and investors should understand beforehand what to expect. Crypto markets have elevated risks because the value of a coin depends on the views of crypto communities.

BTC price can swing wildly. BTC’s fluctuations happen because of the sentiments in the market. Here, the movers and shakers of the market are individuals in the BTC ecosystem instead of shares of companies. For example, recently, Alon Musk sent a tweet saying that his company has banned BTC at his Tesla Company. The tweet caused a downward spiral in BTC prices. So, before investing, understand that BTC is sensitive to news and get ready for oscillations from time to time.

 Have you looked at other cryptocurrencies?

There is a wide range of cryptocurrencies in the market. New tokens keep hitting the market regularly. And this offers you a chance to conduct background info and look for the best cryptos in the market for your investment.

BTC is the oldest crypto in the market, which many people are familiar with. While some people might give the massive token attention, many other coins exist in the crypto ecosystem, which you must evaluate. From the evaluation, you can determine the crypto to invest in, which can deliver excellent returns. So, it’s advisable to survey the whole market to pick the right coins for your investment strategy.

Are you buying the amount you can be comfortable losing?

Putting all your savings on a volatile market, like crypto, is a severe blunder. While the chances are that you might succeed, you should also anticipate a loss. Investing in crypto is like playing casino games. So, avoid putting all your savings on Cryptos.

Crypto swings present both opportunities are risks. While it’s natural to focus on opportunities, it’s critical to reconcile yourself to the possibility that BTC’s value may plunge. Besides volatility, other risks present in crypto include the potential of your asset being hacked or a harsh regulatory environment. So, you should invest in an amount that you can be comfortable losing.

Although crypto is exciting and life-changing, the fact remains that 100% of the investment value can disappear quickly through weakening value and cyberattacks. So, when investing, always keep this in your mind.

Are you fond of Vegas?

Cryptocurrencies are a new investment class that is new compared to equities and bonds. The market keeps shifting weekly as millions of new entrants join it. And nobody knows what miners, regulators, and governments may decide to do to safeguard investors. Therefore, buying crypto right now is like a voyage to Vegas. And you should expect surprises that you didn’t anticipate.

Do you love learning?

Before you buy any virtual currency, it’s critical to understand how it works and the problems that it solves. Each crypto in the market has a project whitepaper that explains the issues the project is designed to solve, the project’s objectives, how the crypto is different in blockchain technology, etc. So, before purchasing these virtual currencies, ensure that you understand these components competently.

Potential investors should also understand how blockchain technology works. Understanding how the technology works isn’t a walk in the park. The blockchain ecosystem is complex and requires one to invest in learning. So, it would help if you look for tutors who understand the platform to teach you. You should also buy suitable learning materials to help you know crypto concepts.

Conclusion

While crypto dip has come with opportunities for investors, there are multiple questions that you should ask yourself before buying any cryptocurrency. Here, we’ve explored some of the critical questions to ask yourself before investing. The responses to these questions can help you make a wise decision.