Bitcoin Dips Below $29,000 Again. Should You Buy?

Try to keep your eyes on the long-term horizon.

Bitcoin (BTC) slipped back below $29,000 this morning as the lead crypto struggles to gain momentum in an increasingly difficult economic climate. Crypto prices were a sea of red, with Ethereum (ETH) trading below $1,800 -- a key line mark for the lead smart contract crypto.

Why is Bitcoin struggling?

Bitcoin has fallen by more than 50% since its all-time high in November. The crypto fear and greed index continues to register "extreme fear," and many experts predict that prices could still sink further.

In fairness, it isn't only the cryptocurrency industry that's suffering. Equity markets have had a hard time as well, for many of the same reasons. These include the ongoing Russia-Ukraine crisis, high inflation, worldwide fears of a recession, and an increasingly hawkish Federal Reserve. It looks like the Fed will continue to aggressively raise rates in June and July, which is one reason Bitcoin is having trouble keeping its head above the $30,000 mark.

Bitcoin's also been impacted by the collapse of the Terra (LUNA) ecosystem. The way that a top crypto disintegrated in a matter of days has hit confidence in the entire industry. We also don't know what shape increased crypto regulation will take, and whether it will be harsher as a result of the Terra debacle.

However, there is some positive news. Analysts at J.P. Morgan said there's "significant upside potential" in Bitcoin and said crypto is now one of its preferred alternative assets, overtaking real estate.

Should you buy?

The decision to buy crypto depends as much on your financial situation as it does on your long-term view. If you don't have an emergency fund that can cover three to six months’ worth of living expenses or are behind on your retirement savings, focus on these goals first. Getting your financial bases covered is more important than any high-risk investment like crypto.

Bear in mind there are no guarantees, and many of the 19,000 cryptocurrencies out there will fail completely. We hope that Bitcoin will recover and eventually go on to reach new highs, but crypto is a relatively new and unregulated industry, and there's a lot we don't know about how it will unfold. This is why most experts recommend only investing money you can afford to lose -- that way if crypto collapses, it will be disappointing but not devastating.

Moreover, don't buy Bitcoin if you're hoping to quickly make the same returns we saw last year. We are in a very different climate and there simply isn't the same amount of stimulus money being injected into the economy. The Fed's priority is to get inflation down, and it's likely to continue to raise interest rates and introduce other tightening measures until it achieves this. The result? A pull back on all kinds of assets, including equities and crypto. Crypto's been particularly hard hit, as it's already a high-risk and volatile asset, and that won't change in the near future.

What matters is where you think Bitcoin and other cryptos might be in 10 or 20 years. If you believe Bitcoin might perform well in the long term, it may make sense to buy. Be prepared for further price dips and the rollercoaster volatility that is part and parcel of crypto investing. Finally, don't rush into a decision just because the price dipped a little more today. Take your time and research Bitcoin and blockchain technology. If you fully understand why you're investing, it's much easier to hold on through difficult times.