Bitcoin and Ethereum Are Both Down at Least 11% the Past Week. Should You Buy?

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  • Last year, Bitcoin saw a 73% return for investors according to Arcane Research; and the 10 years prior it had annualized returns of more than 220% while Ethereum soared more than 400% in 2021.
  • However, the two largest cryptos by market value are both down at least 11% over the past week and at least 30% from their all-time highs.
  • Despite the bearish short-term price pattern, each project has a significant bullish "megatrend" that suggests long-term upside.

Bitcoin is down nearly 4% over 24 hours and 11% this past week, while Ethereum has declined 6.5% over the past day and is off 12.5% over the past seven days at press time.

The two largest cryptocurrencies by market value -- Bitcoin and Ethereum -- account for more than half of the $1.89 trillion cryptocurrency capitalization of the entire sector, which comprises thousands of digital projects according to CoinMarketCap.

Last year, Bitcoin (BTC) produced a 73% return for investors and the 10 years prior it had annualized returns of more than 220%. Meanwhile, Ethereum (ETH) soared more than 400% in 2021. While both digital currencies have been dynamic price performers in the past, they have been struggling recently.

Bitcoin is down nearly 4% over 24 hours and 11% this past week, while still 40% off its all-time high last November. Similarly, Ethereum has declined 6.5% over the past day and is down 12.5% over the past seven days, remaining 36% off its own November peak.

Why BTC and ETH will be fine in the long run

Despite this short-term pause in price pumps, both Bitcoin and Ethereum have two respective "megatrends" that will inevitably propel their prices higher.

First for Bitcoin, according to blockchain analytics firm Glassnode -- which monitors activities across the major cryptocurrency networks -- its analysts have noticed a trend where an average of 96,000 Bitcoin have been moved each month off of the major cryptocurrency exchanges. In its most recent report, a Glassnode analyst called this volume of movement "historic" because it suggests a strong accumulation trend for Bitcoin that was first detected in March 2020.

The movement of Bitcoin off of trading exchanges means holders of that asset are storing it for safekeeping in their own custodial digital wallets -- they are not selling it. Since we know that Bitcoin has a finite supply of 21 million tokens, of which 19 million have been mined, there is going to be a supply shortage as holders continue to hoard their BTC. As that supply shock hits -- and holders don't sell -- the price of Bitcoin will inevitably increase according to Glassnode.

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As for Ethereum, its developers have been working for years to move from the blockchain's original proof-of-work (PoW) consensus model to a more eco-sustainable, proof-of-stake (PoS) approach to validate network transactions. An important aspect of this move will be that a percentage of every newly minted ETH coin will be burned, reducing its supply over time making it a more deflationary asset -- much like Bitcoin.

Additionally, transitioning from PoW to PoS has been called ETH 2.0 and Ethereum Consensus Layer -- but it's most recently been dubbed the "Ethereum Merge." This enhancement is expected to significantly increase the number of transactions per second the blockchain can handle, reduce costs for each transfer, improve global scalability of the network, and shorten settlement times.

The long-awaited upgrade is expected to be deployed as early as this June or sometime in the fall, and is expected to have a positive impact on ETH's price in the long run.

Should you buy BTC and ETH?

In light of these two major trends, the future of both these blockbuster cryptocurrency projects is very bright.

Remember, this is not financial advice. You should always do your own research and invest only what you can afford to lose. If either of these projects interests you, the best approach is to begin dollar-cost averaging, which is a way to minimize investment risk by using the same amount of funds every week or every month to build a portfolio over time.

With this approach of using the same amount of money consistently, you "average" out the peaks and valleys of entry points. However, it's usually better to invest at lower entry points if you can, and these two high-quality cryptos are currently at deep 30%-plus discounts from their past price peaks.

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