Bitcoin Crashed Again! Avoid or Buy Low?

Investors who want exposure to cryptocurrency should continue to avoid Bitcoin and shift to a safer blockchain stock like HIVE Blockchain Technologies Ltd. (TSXV:HIVE) that is directly involved in crypto mining.

| More on:
Big Bitcoin logo.

Image source: Getty Images

Just about a week ago, I wrote about the resurgence of Bitcoin (BTC) in late May. The price of the most popular cryptocurrency was nearing $10,000, and it made the crypto bears jump with joy. With BTC springing back to life, the year-long wait for a trend change has finally arrived.

However, instead of moving up, BTC nosedived below the $8,000 mark. Many believed the big move was long overdue and a strong bullish breakout is at hand. If you’re thinking that this could be a buying opportunity, you should think again. This is another superficial move by the leading cryptocurrency by market value.

Enthusiasm is over

The excitement started in early April when BTC climbed by $1,000 to $5,080 in one hour. To the bears, it signaled a transition from a bearish to a bullish market. That was a surprise because a month before, BTC’s average daily trading range sunk to two-year lows. There was a sudden increase in buying pressure.

In 2016, there was a mining reward halving. This halving is a scheduled, programmatic reduction in the amount of new Bitcoin paid to miners. This became a protocol in cryptocurrency mining. The said protocol automatically reduces new issuance after a certain number of blocks are processed,

The next mining reward halving will be in May 2020, and since BTC is due to undergo one, the process tends to put a bid on the digital asset a year in advance. Bitcoin traders usually react to an incoming mining reward halving. It can be a potential catalyst. According to a crypto expert, this caused the price surge.

Another reason could be the market misdeeds. Reuters reported that a single algorithmically managed order resonated across several major exchanges. The order was worth $100 million. That must have created upward pressure on the BTC price and prompted the unexpected rally.

Risks to investing in BTC

Bitcoin is the most successful currency by far, and proponents are certain that virtual currency is the future of monetary exchange. Nonetheless, serious risks abound. Investors are warned about investing in the cryptocurrency space.

The BTC price is constantly fluctuating back and forth. With the unpredictable behaviour, you’re not sure if you will realize a return on investment. In order to avoid massive losses, you might as well avoid investing altogether.

Hacking is the most serious risk in the crypto market. Don’t be swayed by the protection offered by the smart wallet. Technology-based investments are prone to cyber-attacks. Once you’re victimized, you can never recover the stolen or lost Bitcoins. Keep that in mind.

Invest in a blockchain stock

Investors who are enamoured with digital assets like Bitcoin are better off investing in blockchain stocks instead. HIVE Blockchain Technologies (TSXV:HIVE) owns several mining farms and is directly involved in cryptocurrency investing.

Now that the use of blockchain technology is becoming widespread, long-term investment opportunities are opening up for companies operating in the industry. You might as well invest in HIVE during its early stages before it gets expensive.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned.

More on Tech Stocks

clock time
Tech Stocks

Long-Term Investing: 3 Top Canadian Stocks You Can Buy for Under $20 a Share

These three under-$20 stocks offer excellent buying opportunities for long-term investors.

Read more »

Businessman holding AI cloud
Tech Stocks

AI Will Transform Everything: Investors, Be Early Adopters and Buy These 3 Stocks

Investors looking to invest in companies doing big things in AI should consider these three stocks for their portfolios.

Read more »

stock research, analyze data
Tech Stocks

Forget Shopify: These Unstoppable Stocks Are Better Buys Today 

Should you consider buying Shopify stock while rivals consider a buyout or should you go for stocks with a stronger…

Read more »

A colourful firework display
Tech Stocks

2 Potentially Explosive Stocks to Buy in March

These two growth stocks are destined for many more years of market-crushing returns.

Read more »

edit CRA taxes
Tech Stocks

TFSA Millionaires Are Learning They Can Still Be Taxed

If you day trade stocks like Shopify (TSX:SHOP) in a TFSA, you may be taxed.

Read more »

Shopping and e-commerce
Tech Stocks

Where Will Lightspeed Stock Be in 5 Years?

Lightspeed stock (TSX:LSPD) continues to be touch and go, so what might happen in the next five years?

Read more »

Technology
Tech Stocks

Here’s Why Constellation Software Is a No-Brainer Tech Stock

Are you looking for tech stocks to add to your portfolio? Constellation Software is a no-brainer!

Read more »

Businessman holding AI cloud
Tech Stocks

2 AI Stocks That Wall Street Likes Better Than Nvidia

NVIDIA (NASDAQ:NVDA) may be trendy but Shopify (TSX:SHOP) has more upside according to Wall Street.

Read more »