Please ensure Javascript is enabled for purposes of website accessibility

Crypto Is Crashing: Is Now the Time to Invest?

By Katie Brockman - May 23, 2021 at 10:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Should you buy when prices are lower?

Cryptocurrency has always been volatile, but it's experienced quite the wild ride over the past few months. After shattering records and reaching staggeringly high prices, cryptocurrencies have taken a sharp turn for the worse.

Bitcoin (BTC -0.40%), which reached a high of around $65,000 per token last month, has fallen by more than 30% over the past 10 days, as of this writing. Other popular cryptocurrencies Ethereum (ETH -0.88%) and Dogecoin (DOGE 10.02%) are also down around 30% over the same time period.

Sometimes, market crashes are beneficial to investors because they're an opportunity to buy stocks at bargain prices. If you've been eager to invest in cryptocurrencies but are hesitant about the sky-high prices, a crypto crash could make them more affordable. But does that mean you should invest?

Person sitting at a desk looking at a laptop and phone

Image source: Getty Images.

Consider your tolerance for risk

The latest crypto crash is further proof of this sector's volatility. Considering cryptocurrency's history, a 30% drop is fairly mild. Bitcoin, for example, has fallen by more 80% on three separate occasions since 2012, according to data from Visual Capitalist. 

This year alone, Bitcoin has already experienced several steep drops. So this recent crash is par for the course -- and there will likely be many more crashes like this in the future.

Bitcoin Price Chart

Bitcoin Price data by YCharts

Before you invest in cryptocurrency, think about whether you can tolerate this level of risk. Although Bitcoin has always managed to bounce back from its slumps, there's no guarantee it will always recover.

If you know you're going to lose sleep when your investments plummet overnight, crypto may not be the best investment for you. But if you have the stomach for this type of turbulence, you may have the right personality for investing in crypto.

Choose your crypto carefully

If you decide to invest in cryptocurrency, buying when prices are lower may be a wise move. Especially if you're investing in a higher-priced currency like Bitcoin, you can get more for your money when buying during a downturn.

Just be sure you've done your research before you invest. The fact that a cryptocurrency is more affordable doesn't necessarily mean it's a smart investment, so consider all your options before you buy. The goal is to buy investments you can hold for the long term, so make sure you're choosing the right cryptocurrency for you.

Digital Bitcoin symbol

Image source: Getty Images.

Bitcoin is the biggest name in the crypto space, and it's also the oldest cryptocurrency. This gives it a leg up on the competition. However, it's an energy-intensive cryptocurrency, which poses environmental concerns. In fact, Tesla CEO Elon Musk recently announced that the company would no longer accept Bitcoin as a form of payment because of its environmental impact.

Ether is the second-most popular cryptocurrency, and it uses the popular blockchain Ethereum -- which is also the blockchain behind non-fungible tokens (NFTs) and decentralized finance. Because the Ethereum blockchain has a variety of uses, that gives it an advantage. In addition, developers are currently working on Ethereum 2.0, which will be more energy-efficient and environmentally friendly.

Dogecoin is one of the riskiest cryptocurrencies, and buying this particular token is more similar to gambling than true investing. If you do choose to go this route, be sure you make this decision carefully.

Regardless of which option you choose, only invest money you can afford to lose. Crypto is still a high-risk investment, even if it is more affordable right now. While cryptocurrency isn't right for everyone, if you've decided to invest, you can save some money by investing when prices are lower.

Katie Brockman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bitcoin and Tesla. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Ethereum Stock Quote
$1,874.14 (-0.88%) $-16.72
Tesla, Inc. Stock Quote
Tesla, Inc.
$919.74 (-0.89%) $-8.22
Bitcoin Stock Quote
$23,924.45 (-0.40%) $-96.76
Dogecoin Stock Quote
$0.09 (10.02%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.