Cryptocurrencies were on a wild ride in 2022, with many investors experiencing both highs and lows. In this article, I will answer the question, “Is crypto dead?” and explain my point of view. But why should you trust me? I’ve been paying attention to bitcoin since 2013, and have been investing since 2016 so I’ve witnessed 3 full bull and bear cycles. It’s hard to see the big picture while you’re in the middle of everything, so let me share my experiences that can help you to make a more educated decision in the crypto market.
Is crypto dead?
This is what some mainstream media will try and lead you to believe. But that really is just headlines to get views and clicks. You’ll hear that you shouldn’t buy crypto anymore because it’s no longer viable. Don’t believe all this FUD. In my opinion, crypto is not dead. No way. Not by a long shot.
For all of us who have been with crypto for a few years now, have seen the bear and bull cycles repeat themselves. Today, in February 2023, we are currently in a bear market. And honestly, this is the time to capitalize on the opportunity to generate life changing gains when the market starts to turn to the positive. Normally, people don’t start investing in crypto until it’s already in the mania phase, which leads them to buy in at values closer to the top. This leads to portfolio losses as the market will always correct after the big bull run comes and Bitcoin and Ethereum become household names at the dinner table.
The current state of crypto
We hit the peak of cryptomania in November of 2021, where we topped out at about a $3 Trillion market cap. Today we’re sitting at $1.1T of total crypto market cap. Bitcoin is at ~$24k and Ethereum is at ~$1,635 from highs of $67,600 and $4,815 respectively. While we are down around 65% from the highs, the amount of value of the cryptocurrency market is still significant. And if history even rhymes, if not completely repeating, we have always surpassed the previous highs once the market recovers.
This is why now is the time to keep learning about the market and to keep buying while prices are depressed. Crypto is not dead at all, it is simply retracting from a period of exponential growth.
Investment strategy for todays down market
As they say, time in the market always beats timing the market. Today is no different. In my experience, you will always be wrong more than when you’re right. For this reason, I believe that it’s always best to dollar cost average. Come up with a strategy of what you want to do, i.e. increase your position or decrease your position, and then set regular intervals on when you make your trades.
For example with today’s market, it wouldn’t be an unreasonable strategy to want to increase your position as prices are down and you want to have money invested before the market recovers and prices begin to appreciate. Set weekly or bi-weekly intervals and pick an amount you want to buy in and then set it and forget it. This way you’ll remove all emotion from your decision making process and you won’t feel bad if the market goes up or goes down after you make your trade. Also, this eliminates the potential for analysis paralysis which I definitely suffer through many times when I’m deliberating over a trade.
Other ways to benefit in the current conditions
Educate yourself now and familiarize yourself with the many crypto tools are out there so you can make moves when all the green candles are incoming. From what I’ve seen, it’s best to be in front of the wave, rather than on it or behind it. Once everyone is talking about crypto is when you should be averaging out and taking profits. Any one who’s seen a bull and bear cycle will tell you that you need to realize your gains, otherwise you’ll ride the price action all the way back down.
Make sure you are prepared for the tax implications. If you want crypto to become mainstream, it will have to have regulations and taxes. Make sure you’re prepared to cover your tax burden, especially if you had big gains. And conversely if you’re holding coins in the red, it might be a good idea to rotate out of them to lock in a loss for tax purposes. Just be aware of what a wash sale is.
Crypto is not dead, and if you’re still involved in some level right now you are in a great position to take advantage of the next market upswing. Like investing in any asset, you want to buy when the prices are low so that you can sell when they are high. The biggest lesson you will need to learn is to control your emotions. This is done by having a plan and sticking to it. Keep learning and come back to the blog and I’ll be sharing all of my experiences and learnings so you can succeed in the future. As always, please do your own research and consult a financial expert before making any large investment decisions. This is not financial advice.