Cryptocurrencies have recently made a comeback, with the prices of major cryptocurrencies such as Bitcoin and Ethereum skyrocketing. After a long cryptocurrency winter, many investors are relieved to see positive momentum in the market.
But others are skeptical of how long this comeback will last. Famous for its volatility, the cryptocurrency industry has shown that it can go down as fast as it goes up.
If prices continue to rise, it could be an attractive time to buy. But is it really safe to invest now? Here’s what you need to know.
The future looks bright – for now
There are countless reasons why cryptocurrencies are exploding right now.
Part of this growth is due to the fact that Ethereum recently set a date for its latest update, The Merge, which supports the transition from a Proof of Work (PoW) protocol to a Proof of Stake (PoS) protocol. This is promising news for investors, as the PoS protocol will result in much faster transactions, lower fees, and a more energy efficient network.
Cardano is also working on its own update, according to Vasil Fork, which will bring a number of improvements to the blockchain. The release is currently scheduled for late July and the excitement surrounding the update could fuel investor optimism and push cryptocurrency prices higher.
However, this doesn’t necessarily mean the worst is over. Many Americans are bracing for a recession, and the economic downturn could push them away from riskier assets like cryptocurrencies. If stock prices change abruptly, cryptocurrencies could also be affected.
Being an extremely volatile investment, cryptocurrencies are sure to experience further turbulence in the future. It is unclear when the crash will occur or how strong it will be, but volatility is a normal occurrence when it comes to cryptocurrencies.
Is it safe to invest now?
Regardless of whether prices rise or fall, it’s not necessarily a bad time to invest in cryptocurrencies.
Investing when prices go down can be scary, but it’s also a great opportunity to invest at a discount. Cryptocurrencies are an expensive investment, and buying them during a recession can save you a lot of money. Buying when prices go up will cost you more, but it may also be less profitable than investing during a recession.
The best way to assess if now is the right time to invest is to consider your financial situation and your risk appetite.
Money is tight for many investors right now and not everyone can afford to invest in something as risky as cryptocurrencies. If you don’t have any emergency savings, it’s best to focus on this goal first. It should also be verified that the rest of the portfolio is sufficiently diversified in the event that cryptocurrency investments fail.
So consider the risk you can take. Cryptocurrencies are still speculative and the recent price hike does not necessarily mean they will be successful. We are likely to see greater volatility in the future and it is wise to invest in cryptocurrencies only if you are comfortable with a high level of risk.
Cryptocurrency prices can rise, but it is always important to invest with caution. It’s not the right investment for everyone, and your overall tolerance for risk and volatility will help you determine if it’s right for you.