It's been a rough few months for the crypto market. After reaching record highs late last year, cryptocurrency prices have plummeted.
Bitcoin (BTC 5.53%), for example, fell more than 44% between its peak in November and mid-March. Ethereum (ETH 2.95%) was down more than 48% in that timeframe, and Solana (SOL -2.19%) sank by roughly 68%.
However, the last few weeks have been more promising for the sector as prices have started to rebound. Does that mean right now is the time to invest? Here's what you need to know.
What does the future hold for crypto?
While prices may be on the upswing right now, that doesn't guarantee we'll see record-shattering gains. However, because prices are still relatively low, that can make it a smart time to buy.
Although it may seem counterintuitive, market downturns can be some of the best buying opportunities because prices are significantly lower. Bitcoin, for instance, is currently priced at around $46,000 per token, down from its all-time high of nearly $70,000 per token. If prices do surge in the coming weeks or months, buying now could be a profitable move.
But even if prices dip again, that doesn't necessarily mean you shouldn't invest now. Cryptocurrency is a long-term investment, and short-term volatility may not matter as long as the average gains over time are positive. In other words, if you believe in crypto's long-term potential, when you buy is not quite as important.
Should you invest right now?
Before you buy, there are a few factors to consider. First, think about how much risk you're willing to take on.
Cryptocurrency's success is not guaranteed, as it's still highly speculative at this point. Even major cryptos like Bitcoin and Ethereum could still fail, and if that happens, you could lose your entire investment.
It's wise, then, to avoid investing any money you can't afford to lose, and be careful about how much risk you're taking on. Double-check that the rest of your portfolio is solid, because that can help cushion the blow if your crypto investments take a turn for the worse.
Also, be prepared for more volatility in the near term, as crypto is famous for its extreme ups and downs. Bitcoin has lost more than 80% of its value in the past, for instance, and Ethereum once saw its price fall by roughly 95% back in 2018.
Again, if crypto thrives over the long term, these short-term crashes may not matter. But if you know you'd lose sleep over this level of volatility, crypto may not be the best investment for you.
Finally, make sure you do your research when deciding where to invest. While all cryptocurrencies are speculative to a degree, some are stronger investments than others. By looking at factors like a cryptocurrency's advantages over its competitors and whether it has any real-world utility, your investments will have a better chance of performing well over the long term.
Cryptocurrency is a risky investment, but it could also be incredibly profitable. While crypto won't be the best fit for all investors, if it is right for you (and you've done your homework), now could be a smart time to buy.