Cryptocurrency: 5 reasons to buy the dip and 5 reasons to stay away
There are clear reasons to buy cryptocurrency right now, and equally good reasons to sell and run.
Cryptocurrency prices have crashed. Or maybe they're still in the process of crashing. Either way, almost everything on the market is the cheapest it's been all year. Depending on who you are, it's either a great big flash sale where everything's going for cheap, a time to sell off and stay away or a karmic comeuppance for an overhyped asset class.
In any case, there are at least five good reasons to buy now. Like, right now at this very moment.
There are also at least five reasons to dispose of any cryptocurrency you may have and to then stay far away.
1. Prices are down
Prices are at the lowest point they've been all year. If cryptocurrency is something you do want to get involved in, and are happy to place a bet on, this might be about as good as it gets. And with various government currencies burning down, there could be a rally coming.
Cryptocurrency sceptics have declared it dead hundreds of times over the years and been wrong every time.
2. Bitcoin ETFs are coming
Bitcoin exchange traded funds (ETFs) are anticipated to deliver a big lift to the market, pending regulatory approval. So far they've been knocked back, but it's only a matter of time until they go through.
Lift-off was only delayed, not cancelled. If you believe in the potential of a bitcoin ETF, then that potential still holds true and might signal a future rise.
3. The tech is sharp and it's early days
The managing director of the International Monetary Fund has pointedly said that cryptocurrency is not just a passing fad. Meanwhile, businesses of all kinds are racing towards it.
It's clear by now that cryptocurrency and distributed ledger technology has a place in the future, and that it's still early days. In that context, these mini-crashes might be the perfect time to get in if you haven't already.
4. It's a practical way of diversifying investments
By the numbers, there's a solid case for cryptocurrency in most portfolios. Diversification is only effective to the extent that different asset values actually move independently of each other, but most traditional investments tend to be closely linked.
Cryptocurrency actually tends to move independently though, giving it a unique value proposition even if its prices just waffle back and forth instead of clearly rising.
5. Allegedly smart people are buying
A lot of people with a lot of financial experience, a lot of money and a lot of very nice suits are buying cryptocurrency, especially whenever prices drop. If you buy the dip, you're in some distinguished, or at least very well-dressed, company.
Then again, they've also been losing money on those purchases all year and predicting million dollar bitcoin by 2019, so maybe they're just sharp-looking lunatics. But cryptocurrency has always been a crazily audacious idea – that's exactly why it's so fascinating and hype-worthy.
1. Prices could go down more
If you start with $100 of cryptocurrency and it falls by 50%, it's now worth $50. If it then increases by 50%, you're still only up to $75. It would have to increase by 100% to make up for the 50% drop.
By the numbers, holding on through big dips can get very expensive. If you're not prepared to put a lot of effort in, or laid back enough to just let it ride, the volatility may not be worth it.
2. Other things can do better
If you got into cryptocurrency at any time this year, and just held onto it, you're down right now. No matter how you slice it, cryptocurrency has simply not been a good investment in 2018 so far.
Savings accounts might not make you rich anytime this millennium, but they do consistently go up even if only to cover inflation. There are plenty of non-cryptocurrency options out there.
3. There are too many ways to lose it all
Lose your private keys? Leave your coins on an exchange that's gone bankrupt? Accidentally open the wrong email attachment? Get personally targeted by hackers?
Get scammed? Send coins to the wrong address? Send coins to the wrong wallet? Have malware on your computer? Say goodbye to your coins. It might make more sense to cash out while you can, instead of losing your crypto for nothing at a later date.
4. Scams are everywhere
By some measures, literally every single cryptocurrency project in existence is a scam. If that's the case, you have about a 100% chance of landing on a scam whenever you try to buy.
More modest estimates put the prevalence of ICO scams closer to the 80% range, most of which are spotted quickly. Either way, investing in fire comes with a chance of getting burned.
5. It's not worth the effort
Why are you interested in cryptocurrency? Is it a long-shot get-rich-quick scheme or a get-slightly-wealthier-slow scheme? Do you have a fascination with the technology? Is it because you took out a six-figure loan to buy bitcoin at $20,000 and are now going double or nothing?
All of those are excellent reasons to be involved in cryptocurrency (disclaimer: this is not financial advice), but it's always worth asking yourself what you want to get out of cryptocurrency, whether it's an effective tool to help you reach your goals and whether the effort you're putting into it is worth the progress its giving back.
Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and ADA.