Bitcoin has a strong solid start in 2022.
The highest cryptocurrency fell below $33,000 on Monday to its lowest level since July, before offsetting some losses later in the day.
However, digital assets have so far fallen by about 20% and almost 40% below the overall hit in November.
This means that an investor who invested $1,000 in bitcoin at the beginning of the year now has about $780 in his account, after only a few weeks of holding this asset.
While such loss can be frightening, they also provide an opportunity for people to review their financial plans and buy more cryptocurrencies than would make sense, said Tyrone Ross, CEO of Onramp Invest, a crypto active platform for financial advisors and companies.
“If someone sells and you want it, you have to buy it,” he said.
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Although bitcoin is fighting for meaningful profits, the bulls say the money has plenty of room to grow this year.
“I think [bitcoin] will reach $100,000 this year, maybe in the middle of it,” Antoni Trenchev, co-founder and managing partner of the Nexo cryptocurrency lending platform, told CNBC “Street Signs Asia” on Monday.
Other experts predict similar predictions. Matt Hougan, chief investment officer at Bitwise Asset Management, told Bloomberg TV in an October interview that bitcoin could reach $100,000 in 2022.
Goldman Sachs analysts wrote in a recent note that the company sees that bitcoin is taking over the market share of gold and rising to a key level.
In addition to potential price action, cryptocurrencies have become a more integrated and accepted form of payment.
“I don’t think we’re in mass adoption yet, but we’re in mass acceptance,” Ross said, adding that for those who did their research and decided that cryptocurrencies were for them, the time was right to jump into investment.
Market time is important
You don’t have to hurry your investment just because, according to experts, it is relatively cheap.
If buying cryptocurrencies doesn’t meet your long-term financial goals, you can’t buy them simply because it’s a relative discount, says Ivory Johnson, a certified financial planner and founder of Delancey Wealth Management in Washington, DC.
“If your time set is 10 years, I think now is a good time to buy it,” he said.
Otherwise, it advises investors to take a holistic approach to the asset class, instead of trying to make time in a rapidly changing market.
According to him, investors should have a clear reason to buy cryptocurrencies, instead of just withdrawing them, because the price has fallen. Reasons include looking at the asset as a storehouse of value, looking at it as irrelevant, or because you want to own it because of a growing number of assumptions.
Before they jump in, people need to think about how much of their total portfolio has been invested in cryptocurrencies and make sure the allocation matches their risk profile, Johnson said. New investors need to have a good understanding of how much they are willing to take before buying.
“If you put 20% in cryptocurrencies and you can’t handle losses, you get a known problem,” he said. “But if you get 1% or 2% or 3%, it’s not a big hit on your portfolio.”
Investors should expect cryptocurrencies to continue to move. According to Ross and Johnson, a historically risky asset has never been tested in the environment we see today, where interest rates rise.
“You have to fully expect [the crypto] to go even further down, so put in what you can lose,” Ross said. “If we wake up tomorrow and it’s zero, you can still pay for your hair.”
Before investing in cryptocurrency, both experts emphasize the importance of a secure personal financial situation and a clear investment plan. “If average dollar costs fall and also rise, it could smooth the order and also improve revenue,” Ross said.