The cryptocurrency market has been shakier than usual over the past couple of months.
Late last year, many cryptos were reaching record highs. Since then, though, prices have been steadily declining. Even crypto giants like Bitcoin (BTC -0.60%) and Ethereum (ETH 1.55%) sank roughly 50% between mid-November and late January.
Recently, though, prices have been on the rebound. Bitcoin is up roughly 20% over the last two weeks, and Ethereum has surged by more than 30% in the same time period. Does this mean crypto is back on the upswing? And if so, should you invest now? Here's what you need to know.
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Will crypto prices continue rising?
There are a number of reasons why crypto prices could be fluctuating at any given time, and it can be difficult to know exactly why the market performs the way that it does.
The stock market as a whole has been on the rise recently, which could be helping fuel crypto prices as well. Growth stocks, in particular, have been surging lately, which could signal that investors are more willing to take on risk.
In addition, regulators seem to be more open to the idea of cryptocurrency. Russia, for instance, has appeared to embrace crypto, a stark contrast to a few weeks ago when the country was set to ban it.
All of these factors could be contributing to crypto's surge, but that doesn't mean this upward trend will last forever. This sector is famous for its volatility, and it's safe to say that there will be more ups and downs in the future. When, exactly, that will happen or how severe those downturns will be is anybody's guess, however.
Should you invest now?
The most important thing to keep in mind when investing in cryptocurrency is that it's a long-term investment. While some investors have made a lot of money through short-term trading and trying to time the market, these strategies are extremely difficult to pull off successfully.
A safer tactic, then, is to buy and hold for the long term -- meaning at least a few years, if not decades.
There is a chance that crypto won't be around a decade or so from now, so consider whether that's a risk you're willing to take. Also, there will almost certainly be more volatility in that time, and some of those downturns could be severe. It's not unusual for cryptocurrencies to lose 30%, 40%, 50% or more of their value in a matter of weeks.
Bitcoin Price data by YCharts
If you're comfortable with that level of volatility, crypto may be the right investment for you. Just be sure you're only investing money you can realistically afford to lose, because in the worst-case scenario, you could potentially lose your entire investment if crypto fails.
It's also important to invest in the right places. For every Bitcoin or Ethereum, there are hundreds (if not thousands) of smaller, sketchier cryptocurrencies that have very little potential. There are also more scams than ever in the crypto space, so it's crucial to do your research and be careful about where you invest.
Cryptocurrency has been gaining steam recently, which could make it a smart time to buy. Just be sure you're aware of the risks involved, and be prepared to hold your investments despite short-term volatility. With the right strategy, you'll be as prepared as possible to dive into the crypto market.
