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Bitcoin Had its Worst Month in Almost 10 Years: Buy Low?

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Many people find it hard to believe the bold predictions of rabid followers that their beloved Bitcoin is digital gold. But, unfortunately, the world’s most popular cryptocurrency showed its volatile nature once more and had its worst month in May 2021 after almost 10 years.

After closing slightly above US$63,500 on April 13, 2021, Bitcoin’s price came crashing down. It sunk 41.73% to US$37.002.44 on May 19, 2021, before settling at US$37,332.86 at month’s end. As of June 4, 2021, the digital token’s price is US$36,894.41. So, should investors buy low or move away from Bitcoin for good?

Series of bad news

Many factors caused Bitcoin’s downward spiral. For example, Tesla’s CEO Elon Musk told customers recently that the electric car maker will no longer accept Bitcoin payments. His reason was the environmental impact of Bitcoin mining.

The U.S. and China are also starting to crack down on cryptocurrencies. While the Federal Reserve hints at a possible digital dollar, the U.S. Treasury Department plans to tax Bitcoin heavily. Nevertheless, investors who’d bought the crypto on year-end 2020 are still up 27.21% year to date. However, JP Morgan’s Bitcoin expert Nikolaos Panigirtzoglou believes the crash isn’t over.

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Historical drop

The percentage decrease of Bitcoin in 2021 is nearly the same as the drop in September 2011. From August to October that year, the monthly plunge was 35%. Had you bought Bitcoin at US$2 on October 2011 and owned it till today, your gain would be 1,960,339%.

In December 2017, the digital currency wiped off 82.5% of its value when the price plummeted from US$20,000 to below US$3,500. According to Tom Lee, co-founder of independent research firm Fundstrat Global Advisors LLC, the recent plunge reinforces the likelihood Bitcoin has reached the bottom.

Lee predicts the price of the digital currency will exceed US$125,000 before year-end. If the swings get smaller, and it rises above US$40,000, it’s a sign Bitcoin has seen its lows this year.

Easy investing, difficult trading

Peter Smith, CEO of Blockchain.com, said, “It is really easy to be a crypto investor. It’s extremely difficult to be a crypto trader.” Canadians should take the cue from the statement. Bitcoin remains notoriously volatile. You have safer and better investment options on the TSX.

A growth stock like Mogo (TSX:MOGO)(NASDAQ:MOGO) should be up the alley of regular investors. The fintech stock trades at $9.11 per share and is among the TSX’s top performers with its 88.22% year-to-date gain. Its trailing one-year price return is 600.77%. Market analysts recommend a buy rating and see a potential climb to $16 (+75.63%).

The $590.31 million financial technology company has several apps to help clients take better control of their financial well-being. MogoSpend is a digital spending account, while MogoProtect is for ID fraud protection. MogoMoney and MogoMortgage are for those who need to obtain personal or mortgage loans.

Customers can also buy and sell Bitcoin through MogoCrypto. The advantage of this fintech stock is that it has the TSX as the central authority. Moreover, the recent crash impedes the broader adoption of cryptocurrencies by institutional investors.

Tough gig right now

Chris Weston, Pepperstone Financial’s research head, sums up the situation. He said, “Crypto is a tough gig right now, the tape is messy, and Bitcoin could easily break hard one way or the other.” So, perhaps the best advice is to stay clear of the crypto space.

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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. David Gardner owns shares of Tesla. 

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