Bitcoin and Ethereum Collapse: Now is the time to invest?

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It has been a difficult few months for Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH).

After hitting record highs in November, both cryptocurrencies are on a downward slope. Bitcoin is down more than 36% since its peak, and Ethereum has fallen almost 30% from its all-time high.

Several factors could fuel this recent sale, including news that the Federal Reserve may raise interest rates in the coming months, as well as the recent internet shutdown in Kazakhstan, a key country for Bitcoin mining.

While this drastic drop may be of concern, keep in mind that in some cases price cuts are a smart opportunity to invest more affordably.

Bitcoin and Ethereum are the two most expensive cryptocurrencies, priced at around $ 41,700 per token and $ 3,200 per token, respectively. But compared to their record prices of nearly $ 70,000 and $ 4,900 per token, these cryptocurrencies are essentially on liquidation right now.

Does this mean you need to stock up on Bitcoin and Ethereum while they are on sale? Not necessarily. Here is what you need to know.

Image source: Getty Images.

Are Bitcoin and Ethereum Good Investments?

When prices fall during a market downturn, it can be tempting to stock up on investments just because they are more affordable. But before you buy, it’s important to make sure that these are the right investments for you.

Like all cryptocurrencies, Bitcoin and Ethereum are still speculative, which means no one is sure how they will perform in the long run. That said, both have some solid benefits that could help them be successful over time.

Bitcoin, for example, is designed to be a store of value and a hedge against inflation. While the jury is still out on how effective Bitcoin is in hedging against inflation, as inflation continues to soar, more investors are turning to Bitcoin as a long-term investment. . It also continues to gain traction as a form of payment, even becoming legal tender in El Salvador.

Ethereum is also poised for further growth in 2022 as it moves to its Ethereum 2.0 upgrade, which will make the network faster, more power efficient, and more affordable to use. This update will not only make it easier to scale Ethereum, but will also help it keep pace with its younger competitors like Cardano and Solana.

Should we invest now?

Whether you invest in Bitcoin or Ethereum largely depends on your tolerance for risk. While this recent crisis may sound alarming, it is not the worst that these cryptocurrencies have experienced over the years. Bitcoin, for example, has lost over 80% of its value in the past, and throughout 2018 the price of Ethereum has fallen by almost 95%.

Such volatility has become the norm for crypto. While there is a good chance Bitcoin and Ethereum will survive this downturn, be prepared for more turbulence if you choose to invest. If you are a risk averse investor, ask yourself if you are comfortable with this level of volatility.

Also keep in mind that if you are investing, it is best to hold onto your investments for as long as possible. In other words, don’t expect to buy now and resell in a few weeks for a quick profit. Only invest if you plan to hold your investments for at least a few years, if not decades.

Like all investments, Bitcoin and Ethereum have their strengths and weaknesses, and they aren’t for everyone. If you can tolerate higher levels of risk and are willing to hold your investments for the long term despite the volatility, they may be right for you. If not, you might be better off waiting now.

This article represents the opinion of the writer, who may disagree with the official recommendation position of a premium Motley Fool consulting service. Were motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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