Is Now The Right Time to Buy Cryptocurrencies?

As we’ve seen in recent months, interest in cryptocurrency as an investment has skyrocketed.

Since the 2020 market rally and the recent announcement by Tesla, the price of Bitcoin and other cryptocurrencies have soared to record levels.

The question on everyone’s mind at the moment is whether now the right time to get aboard the crypto train. Experts from all over the world have weighed in on this issue with some claiming that the market is due for a correction and others expecting crypto prices to remain stable.

To answer the first question, the answer is maybe. Why?

For starters, the cryptocurrency market is an extremely volatile one. Price fluctuations occur every minute of the day and any sudden changes in market sentiment can send prices through the roof or tumbling down.

In a nutshell, crypto investments are not ideal for investors with a low-risk appetite. Jumping in at the wrong time will likely lead to you buying high and selling low. 

However, there are also plenty of reasons why you should invest in cryptocurrencies. From the high rates of return and cryptos decentralized nature, it is clear that the future of crypto investment is a bright one.

With that in mind, let’s see if now is the right time to buy cryptocurrencies.

Why You Should Buy Cryptocurrencies

1. Bitcoin can be a potential safe haven asset

Given the scale of the coronavirus pandemic in 2020, it is highly likely that we have yet to feel the fallout of the economic disaster. With central banks around the world printing cash at an unprecedented rate, an excess influx of cash into the economy could lead to rising levels of inflation.

This will naturally degrade the value of fiat currencies like the USD and lead to an erosion in buying power. Being of a limited supply, Bitcoin displays numerous inflation-resistant characteristics – something which makes it an ideal safe haven asset.

Thus making Bitcoin and other cryptocurrencies the equivalent of digital gold. Click here to know how many Bitcoins are currently in circulation:

2. Cryptocurrencies are being accepted as a medium of payment

One of the reasons why cryptocurrencies have exploded in popularity is the fact that they allow vast sums of funds to be transferred seamlessly from anywhere around the world. As an added plus, these transactions can be completed nearly instantaneously with at minimal cost.

Hence making it possible for businesses to easily make and accept payments from suppliers and customers around the world. With a high-profile company such as Tesla choosing to accept payments in BTC, we will likely have other companies following suit.

An increase in Bitcoin acceptance rates will result in the demand for cryptocurrencies increasing which in turn places upwards pressure on prices.

Why You Should Avoid Cryptocurrencies

1. The crypto bubble could burst 

While Bitcoin prices may be seeing all-time record highs, some analysts predict that a market correction is incoming with some expectations that whale investors would be looking to crystallize their profits.

Whale investors are entities or individuals holding large quantities of Bitcoins. These investors can manipulate market conditions by either buying or selling vast amounts of Bitcoin at a single time.

You likely would not want to end up on the receiving end when the price of Bitcoin suddenly dips in response to a large influx of BTC.

2. Extreme market volatility

The highly volatile nature of crypto investments cuts both ways. On one hand, rapid price fluctuations can result in an investor incurring huge losses. However it can also help an investor reap huge returns on their capital.

Over the past 2 months, Bitcoin prices have increased by over 70% which can be either extremely welcome or unwelcome. The fact of the matter is, the extreme volatility of the market can be used to an investor’s advantage if one is fortunate enough.

Closing thoughts

At the end of the day, it is nearly impossible to predict what will happen in the crypto market next. 

As an investor, you can best protect yourself by diversifying your portfolio of assets and doing your own research.

Adam Hansen

Adam is a part time journalist, entrepreneur, investor and father.