As Bitcoin Plunges, Is Now the Time to Get In?

Should investors buy the dip on Bitcoin, or leave it as is? Let’s discuss.

Cryptocurrency investing generally isn’t for me. These happen to be highly-volatile assets, and remain highly-speculative in nature as well. Accordingly, any such stock with the potential for double-digit swings on a daily basis is one I want to avoid right now.

That said, this market remains a highly speculative one today. Many stocks trade with higher volatility levels right now. The argument could be made that Bitcoin and its crypto peers are simply reflecting the broad sentiment of investors today.

Let’s dive into what’s been going on with Bitcoin of late, as it loses momentum in recent days.

Bitcoin’s volatile moves

Today, Bitcoin prices are up more than 6%, at the time of writing.

That pretty much sums up my volatility argument from before. However, investors should also remember this cryptocurrency is also down more than 10% from its all-time high of around US$65,000 per token.

Generally-speaking, Bitcoin has been moving in an upward trajectory over the long-term. Cryptocurrencies have boomed and crashed, but until now, have always recovered. Accordingly, long-term investors may be enticed to buy the dip with these volatile options right now.

That said, it wasn’t that long ago that Bitcoin was headed toward its worst run in a few months. This slip started after increased capital gains taxes were announced by the Biden Administration in the U.S. A broad-based asset selloff ensued.

Accordingly, a 20% collapse in a few days was seen by investors. Some of this loss has been recovered since then. However, I’d like to reiterate that investing in any asset that can have these sorts of short-term moves shouldn’t be considered by those with low risk tolerance preferences.

Bottom line

Despite its recent pullback, Bitcoin has still managed to advance 70% this year. It has provided 550% year-over-year gains and roughly 800% returns over the past two years. So, investors who decide to sell Bitcoin after holding it for a year or more have to face the brunt of the new capital gains tax if introduced.

Thus, there could be some long-term support for Bitcoin at these levels. Time will tell.

Other ETFs such as the Purpose Bitcoin ETF (TSX: BTCC) could also see some additional inflows over time. As retail investors have more options to invest in crypto, we could see a surge in investment interest over the short-term.

That said, on Bitcoin and its cryptocurrency peers, I’m out. I think these investments are far less stable than many investors think today. Accordingly, those looking to invest should do so prudently. Rather than going YOLO on this trade, putting a small percentage of one’s portfolio in such speculative assets won’t hurt. Ensuring that one can take a complete loss and be okay with that is important with such plays.

Fool contributor Chris MacDonald has no position in any of the stocks mentioned.

More on Investing

Piggy bank on a flying rocket
Stocks for Beginners

Your Emergency Fund Should Be Funded Before Investing in Uncertain Times

Discover why an Emergency Fund is essential in today's volatile market. Secure your finances against rising inflation and uncertainties.

Read more »

customer fills up car with gasoline
Dividend Stocks

Higher Gas and Diesel Prices Pushed Canada’s Inflation Rate to 3.1%: What It Means for Retail Stocks

Retail stocks might experience a major pullback if fuel costs continue to rise and drive inflation higher.

Read more »

a person watches a downward arrow crash through the floor
Stocks for Beginners

Should You Invest When Markets Are Falling? Here’s How to Think About It

Here’s why falling markets and selloffs can create opportunities for long-term investors and how to find high-quality Canadian stocks to…

Read more »

infrastructure like highways enables economic growth
Dividend Stocks

Ottawa’s Budget Is Coming: This Infrastructure Stock Could Benefit Big Time

WSP gives investors several routes into infrastructure spending, supported by work already on its books.

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

Not Sure Where to Invest in Canada? Start With This Dead-Easy ETF

Here’s why a Canadian ETF can be an ideal place to start investing, while leaving room to add high-quality growth…

Read more »

Map of Canada with city lights illuminated
Energy Stocks

Canada as an Energy Superpower: The Stocks I’d Buy Today

If you are seeking to win from Canada’s energy dominance, I would look at buying these three energy stocks today.

Read more »

man shops in a drugstore
Dividend Stocks

I’d Put My Entire TFSA Contribution Into This 5.5% Monthly Passive-Income Stock

RioCan's attractive 5.5% yield, strong retail occupancy, and improving rental outlook make it a compelling monthly passive-income stock for long-term…

Read more »

A person uses and AI chat bot
Tech Stocks

AI Spending Faces a Reality Check: This Canadian Tech Stock Gets Paid to Cut Costs

CGI offers a practical AI investment case built around clients getting useful work done for less.

Read more »