Crypto market sees red — where you invest next will depend on the kind of crypto investor you are

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Crypto market sees red — where you invest next will depend on the kind of crypto investor you are
Crypto investors mull over whether or not to 'buy the dip' amid crypto market crashBI India
  • Relatively established cryptocurrencies, including Bitcoin, dipped by an astounding 20% last week.
  • With many coins still struggling to recover, this is an opportunity to ‘buy the dip’ for many.
  • Depending on how one utilised the dip, they can be one of three types of crypto investors.
The value of crypto assets increased by almost $1 trillion from August to November, before the big splat seen last week. While the first instinct for most investors may be to sell and cut their losses short, experienced traders use such opportunities to ‘buy the dip’ — pick up cryptocurrencies at cheap prices before the next bull run.

"Many market participants are taking advantage of the situation and rushing to stock up on cryptocurrencies from the top-10 list on a drawdown, as indicated by various indicators," Johnny Lyu, CEO of cryptocurrency exchange KuCoin, told Markets Insider.

All investors should, of course, do their own research before making any kind of investment, dator otherwise — which is why it’s important to know when to HODL — hold on for dear life — when to buy and when to sell depending on your appetite for risk.

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As of Monday most cryptocurrencies were still struggling to recover the losses seen last week. The bear phase continued as a further $100 billion worth of market capitalisation (cap) was lost collectively, placing the total value of all cryptocurrencies at $2.5 trillion by the end of the day. The large-cap currencies recovered barely 1-2% since the dips of November 19, leaving Avalanche (AVAX) as the lone coin that saw a 47% rise in value over the weekend.

Stock market participants might notice one principle being carried over to the crypto market, that of a notional loss versus an actual loss. Those who held on to their holdings through all of last week, saw a notional loss in value, which is likely to be temporary and recover the losses eventually. But those who panicked on the November 19 and sold their coins converted it into a permanent loss instead, reflected in actual dollars ‘in hand’.

Which crypto to buy today?



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A cryptocurrency becomes more valuable when demand for it rises. And, while there are different push and pull factors driving the market, most cryptocurrency adoption — as well as cryptocurrency investment — falls into three categories.

A cryptocurrency that serves a purpose, however small

Bitcoin is viewed as a cash-equivalent asset for companies, Ethereum stands out in its support for third party NFT platform developers, Binance Coin has the weight of its exchange behind it, Solana is becoming integral to the DeFi sector, MANA is native to Decentraland’s metaverse games, Monero is accepted as payment on the darknet, and so on.

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Within the crypto community, those who invest in cryptocurrencies by betting on the underlying solution are called the ‘true believers’ — since they ‘believe in the technology’. They’ve read the white papers, understood the tokenomics, analysed the fundamentals and get rewarded when they identify a currency with a use case.

A cryptocurrency that’s conceptually attractive

Terra’s LUNA manages its stablecoins, Uniswap and Polygon make new kinds of transactions possible, Filecoin is building cloud storage, etc. Early investors who identify a promising project could potentially gain when its value becomes more widely known.

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Investments of this kind carry a little more risk due to the lack of historical data. However, they also offer higher returns on making the right call, since investors get in before a cryptocurrencies goes mainstream.

A cryptocurrency that’s irrationally popular, and yet it thrives

Dogecoin arose as a joke, Shiba Inu has its ‘WoofPaper’, Ethereum Classic gained from confusion, and Namecoin fell from being the fourth biggest name in the game to ranking 805. Many such coins go up in value without an intrinsic reason, and go down when investors choose to move to safer shores. The danger is that such coins may never bounce back, after having one season in the sun.

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However, for day traders, the volatility is an opportunity to time the market and make money on the rises and thoughts. Such altcoins are the riskiest part of a crypto portfolio.

What should you do during the crypto market dip?



For true believers, who are sure that the coins they have invested in are good to hold for the long term, a funny but tempting strategy is to "be greedy when others are fearful, and greedy when others are greedy." That would mean making use of the current dip in coin values to buy more coins.

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For those who had bought coins at lower prices and have seen a considerable rise, “keep your powder dry” could sound fair. That means pulling out some or all profits to safer shores, to wait and watch for new investment opportunities in the crypto market.

Those with low risk tolerance may find that now is a wise time to devote more time towards learning about the coins they have in their portfolio. That would help identify what would yield slim profits, what is expected to dip further, and for instance, whether now is the right time to buy more of Bitcoin which is approaching its next ‘halving.’

Last week’s crypto blood bath



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During the last ten days, including the week of November 10 to 19, the crypto market’s bull run — which was charging ahead at full steam — came to an abrupt stop. The worst-hit cryptocurrencies saw their value cut down by a quarter if not more.

Excluding stablecoins, 89 of the top 100 coins saw red to varying degrees, with similar distress seen in the hundreds of other coins commonly traded on crypto exchanges. Unlike the stock markets, crypto trading does not stop in the evening and there are no regulatory ‘circuit breakers’ to reduce volatility — it’s 24 hours a day, seven days a week.

The only cryptocurrency to buck the trend was Avalanche, which as of November 22 at 3:30pm Indian Standard Time (IST), has pushed meme coins Shiba Inu and Dogecoin out of the top 10 with a market value of $3.6 billion, according to CoinMarketCap.

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For context, all of these coins have been slowly regaining part of their lost value, although they are nowhere near their all-time highs seen in early-November. The overall market value of all crypto assets is down to $2.6 trillion from the high of almost $3 trillion seen this month. Despite the dip, that’s still nearly 50% higher than April 2021.

Why is the crypto market down?



Analysts theorise that last week’s dip may simply be investors ‘taking profits’ and cashing out a portion of the coins they owned. Others theorise that growing concerns around the regulatory crackdowns in China and expectations of new crypto laws in the US and other countries may be driving the market.
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“Current market scenario is a result of multiple factors including - china crackdown on crypto, tax provision in US infrastructure legislation and panic selling. This entire irregularity boils down to one single point, that is, investors going by the social media word instead of the proper project analysis.”

Founder and CEO of Cashaa, Kumar Gaurav, told Business Insider

This may not necessarily be a concern, since most of the top 100 coins have retained significant daily trading volume despite the dip in values, according to CoinMarketCap’s data — meaning that trading interest continues despite the prices coming down."It is therefore too early to talk about a general market transition into a bearish phase, since institutional investors are maintaining their cryptocurrency portfolio positions," said Lyu.

Bitcoin – the bellwether of crypto performance



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As the ‘gold’ of the crypto world, Bitcoin is widely held and constitutes over 40% of the total market value of all crypto assets combined. Its position ensures that Bitcoin has usually been part of every bull and bear market over the last 10 years, since it began trading.

Crypto market sees red — where you invest next will depend on the kind of crypto investor you are
The graph shows Bitcoin peaking in late-2013, late-2017 and late-2021 – time periods that correspond to market-wide bull runs, raising wider investor participation and values of most cryptocurrencies.CoinGecko

This historical trend shows peaks followed by dips, with some trends continuing for years – so some people who held-on — or HOLDed — to a reliable coin saw larger-than-life returns, even if it took a few years.

While timing the market isn’t advisable, most investors who followed in Bitcoin’s wake this year and invested in altcoins were in profit-territory by October-end. In addition, most coins are already beginning to recover in value, so a redoubled bull run in December may yet be possible — at least according to the wild predictions made for Bitcoin’s price by billionaires, influencers and analysts alike.
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Also Read

Bitcoin’s rally is far from over — these analysts are betting on the world’s largest cryptocurrency to more than double in value by the end of year

With many coins still struggling to recover, this is an opportunity to ‘buy the dip’ for many. Depending on how one utilised the dip, they can broadly be one of three types of crypto investors.

No matter the kind of crypto investors one is, the recent week-long dip has shown that the eponymous ‘hopium’ is not enough to make gains anymore — simply hoping for bull runs that raise all coins is a rarity as the crypto market matures. The next one could happen in months or take years to climb back up the charts.

Disclaimer: Do your own research (DYOR) before making any investments, cryptocurrencies or other. This article is for educational purposes and not intended to be financial advice.

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Bitcoin’s rally is far from over — these analysts are betting on the world’s largest cryptocurrency to more than double in value by the end of year

Bitcoin’s rally is far from over — these analysts are betting on the world’s largest cryptocurrency to more than double in value by the end of year

With many coins still struggling to recover, this is an opportunity to ‘buy the dip’ for many. Depending on how one utilised the dip, they can broadly be one of three types of crypto investors.