Crypto Investors: Now What?

Crypto investors have seen some digital currencies climb in the last month, after falling to 52-week lows. So what should they do now?

cryptocurrency, crypto, blockcahin

Image source: Getty Images

Crypto investors have had a hard 2022. Not only are growth stocks down, but the incredible gains made by cryptocurrency are all but lost. Bitcoin and Ethereum are both down from 52-week highs, 52% and 59% respectively, on the TSX today.

So what should crypto investors do now? Do you buy up these cryptos for a discount? Or is this set to be another bubble that will burst and never recover? Let’s dig in.

First off, why crypto?

Before you invest in anything, it’s critically important that you understand what it is. There were a lot of crypto investors seeing it as a get-rich-quick scheme, and look how that worked out. Just as you would with anything in life, it’s important not to hop on a bandwagon before knowing what you’re getting into.

When it comes to crypto, investors should think about how it fits in with their long-term goals. Consider how long you want to hold it for. Is it for retirement? Do you need it in a few years? These factors should be carefully considered before getting into cryptocurrency.

So, if you’re still interested in investing in cryptocurrency, make sure you understand it. There are plenty of resources out there to learn about digital currency for crypto investors, along with blockchain technology. Once you learn about it, you’ll want to read the company’s white paper. This should tell you about project developments, plans for future growth, and time frames. If the data isn’t there, that’s a bad sign. No white paper? That’s a major red flag.

Should you invest in a crypto winter?

The current economic environment for crypto investors has been dubbed a “crypto winter.” Because of this, many experts suggest leaving crypto alone for now. And I mean that in two ways. First, you could opt to not buy crypto if it’s anticipated to fall further, but I wouldn’t necessarily sell either. It’s going to remain volatile for a while, so if you’ve found a company you believe in, perhaps wait it out for better days to come.

If you don’t have an investment, consider saving up for when a recovery begins. In the meantime, do more research into the companies you’re interested in. Stay up to date with what’s going on, both privately and publicly as government institutions update their own digital currency. You may end up changing your mind about your investment down the line.

While you’re saving, put aside only what you can. Don’t assume you’ll get a high reward from this high risk game. Crypto investors should only put aside each month what they’re willing to lose in crypto. Because for the next few years, the scenario could remain unpredictable.

When will it end?

The Canadian and American markets enjoyed some positive moves this past week. This has led some economists to believe there may be positive news for crypto investors in the next few weeks. But what it will likely come down to is the price of Bitcoin.

Should the price of Bitcoin stabilize, and move upwards, economists believe this could signal that a recovery is on the way. A rise in stocks usually leads to a rise in cryptocurrencies. However, economists also warn that while a rebound could happen, another drop will likely follow.

So if a rebound begins, I would still stay away from crypto stocks for now. Crypto investors will likely want to wait until a sustained market recovery occurs before considering Bitcoin and other cryptocurrencies. In the last month, Bitcoin is up 4% and Ether is up 22%, but the month was filled with dips.

Bottom line

Right now, crypto investors should stick to researching the industry and companies they want to hold long-term. Once financial institutions get back into cryptocurrency, with a market recovery underway, it may then be time to reconsider the industry. But until then, I’d recommend staying off this bandwagon.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Bitcoin and Ethereum.

More on Investing

Happy shoppers look at a cellphone.
Stocks for Beginners

Why Is Aritzia Stock Up 22% After Earnings?

Aritzia stock (TSX:ATZ) surged in share price after its last earnings, so is it still a good buy? Or should…

Read more »

Growth from coins
Dividend Stocks

1 Dividend-Growth Stock to Buy and Hold for the Next 15 Years

CN Rail (TSX:CNR) is a dividend-growth giant worth buying on weakness in July.

Read more »

analyze data
Dividend Stocks

The 5.11% Dividend Stock Set to Dominate the TSX

Brookfield Infrastructure (TSX:BIP.UN) has already been dominating the TSX, but more is certainly on the way.

Read more »

stock analysis

3 TSX Stocks You Can Confidently Buy Now and Hold Forever

These three companies are some of the top stocks on the TSX, giving you the confidence to buy now and…

Read more »

sale discount best price
Dividend Stocks

3 Remarkably Cheap TSX Stocks to Buy Right Now

Investing in undervalued TSX stocks such as Eldorado Gold should help Canadians derive steady gains in 2024 and beyond.

Read more »

Piggy bank with word TFSA for tax-free savings accounts.

2 Magnificent Dividend Stocks I Plan to Add to My TFSA in August

Here are two magnificent dividend stocks long-term investors may certainly want to hone in on before the next bull cycle…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

1 TSX Stock That Could Help Set You Up for Life

Early investors in Intact Financial (TSX:IFC) stock could earn a 17% dividend yield in 2024. Here's how IFC stock could…

Read more »

Canadian Dollars
Dividend Stocks

2 Magnificent Ultra-High-Yield Dividend Stocks That Are Screaming Buys in July

These two top Canadian dividend stocks offer over 8% annualized dividend yield in July, making them really attractive to buy…

Read more »