Bitcoin recently crashed to below $100,000 (£75,000). Does this mean the days of soaring prices are over – it is now time to get out before a global crypto collapse means you lose your shirt? Or should investors hold their nerve – perhaps even view it an exciting opportunity for a digital bargain? We ask top experts to stare into their crypto crystal balls.
Reading the crypto market
Cryptocurrencies have endured a bumpy ride in recent weeks – with Bitcoin tumbling from a high of just over $126,000 (£94,000) on October 6 to now close to $95,000 (£72,000) – now flattening out and showing little sign of breaking back through the six-figure barrier.
While this might not be the time to press the panic button, you only have to look at how Bitcoin was worth little more than $15,000 three years ago to realise how quickly crypto fortunes can disappear.
‘The shine has certainly come off Bitcoin and that gives me reason for concern. We are in No Man’s Land right now. I will not be buying but shall keep a close eye on whether it could be time to sell. But as the market is not swinging violently one way or the other, it may still be time to just sit on your hands. I am a trend follower, but we currently seem to be in limbo,’ says Glen Goodman, author of bestselling book The Crypto Trader.
He adds: ‘One thing for certain is that trying to decide the exact time to buy or sell in this bear market is like trying to catch knives. You will end up with a bloody hand.’
Chris Beauchamp, an analyst who studies cryptocurrencies at IG Markets, says: ‘Bitcoin smashing its way through $100,000 just a year ago seemed like a catalyst for a fresh wave of momentum buying. You have to remember it hit a record peak just six weeks ago – but now it is essentially flat on the year.
‘Every time it goes up at the moment it seems to then go back down, with fears it is tied to a stock bubble. You must take the rough with the smooth, but this is a maturing market, and I don’t expect the same soaring values or cliff edge falls people who put money into crypto may in the past experienced.’
Tell-tale signs of trouble
Goodman says: ‘There has been a shift in the market fundamentals with more hedge funds, banks and other institutions putting money into crypto due to a fear of missing out and because they had risen in price. They are not conviction investors like we predominantly saw in the early days – but treat it like a tech stock. So, if there really is a tech bubble that bursts crypto could be in trouble.’
Simon Peters, crypto analyst at trading platform eToro, says: ‘Traders and investors have become less confident about a cut to interest rates at December’s [US] Federal Open Market Committee meeting.’
Beauchamp points out that Bitcoin is also not benefiting from being an alternative to traditional stocks and shares as it once was – with many investors now piling into gold instead. He says: ‘Gold is stealing the limelight as the safe haven where you should put your money – rather than crypto. This could concern traders.’
Cryptocurrencies have endured a bumpy ride in recent weeks – with Bitcoin tumbling from a high of just over $126,000 (£94,000) on October 6 to now close to $95,000 (£72,000)
Simon Peters of eToro says: ‘Traders and investors have become less confident’
Crypto may still be good bet
Despite concerns that crypto may have peaked in value – this is nothing new as it has historically often risen and fallen in price while maintaining an upward trajectory over the medium to long term.
Beauchamp, says: ‘Following trends of the past, where the value of Bitcoin has risen by as much as 1,600 pc following a fall, we may still have some way to go. Breaking through the $100,000 barrier saw a rise of 500 pc on the previous value fall.’
Using this calculation, the price could reach up to $280,000 before it peaks – with the current dip just a blip. Beauchamp adds: ‘It doesn’t feel like we have hit wash-out territory in terms of sentiment.’
Danny Scott, chief executive of crypto trading platform CoinCorner, says: ‘The recent Bitcoin price movement is less about Bitcoin itself and more about the wider markets having a knock-on effect on the Bitcoin price.’
He adds: ‘From within the Bitcoin industry, however, nothing has changed. The fundamentals for Bitcoin continue to grow from strength to strength due to its incredible appeal as a globally accessible currency.’
Strategy for trading in crypto
Beauchamp points out that about three-quarters of the 20 million Bitcoins in existence are currently owned by long-term holders – not people who are trying to read the market. He says: ‘This group of people are known as “hodlers” – which stands for “hold on for dear life. And so far over the long term their patience has been paying off.’
He says: ‘Anyone interested should only drip feed small amounts of money initially to get a better understanding of what is going on in the cryptocurrency market. For example, if you are thinking of putting in £500 then consider putting in £100 now to scratch that itch – and then wait perhaps a month to see how it has fared.
‘Consider putting in small amounts of money in regularly, such as every month, rather than one big lump sum. Bitcoin is not for those of a nervous disposition and in the short-term there are bound to be choppy days. Do not get too obsessed by any volatility otherwise you will become a nervous wreck. If you want to get involved due to a fear of missing out, then you are doing it for the wrong reason.’
IG Markets analyst Chris Beauchamp says cryptocurrency still has scope to rise in value
Considering other currencies
Bitcoin is the benchmark for crypto currencies – with other alternatives typically being riskier gambles where values are even more volatile.
President Donald Trump announced in March the creation of a crypto reserve for the US. He surprised many by including alternatives to Bitcoin, including Ethereum, Solana, Cardano and XRP. At the time Trump posted on social media ‘I will make sure the US is the Crypto Capital of the World’ but was scant on the details.
Goodman says: ‘Cryptocurrencies such as Ethereum have recently been doing even worse that Bitcoin. Those that have captured the attention of new money include currencies such as Zcash. But Zcash is often used for undetectable transactions so there is a question mark over them as a crypto currency with mainstream appeal.’
The privacy-focused Zcash was trading at about £50 at the end of September before soaring ten-fold in value to close to £500 now – but it appears to have peaked and stabilised in value in recent days. You should not put money in this volatile currency unless prepared to lose it.
Ethereum is down from a high of about $4,000 a month ago to close to $3,122 now – a fall of about 23 pc. Over the same period Bitcoin has fallen by about 14 pc.
Goodman says: ‘One thing you learn in this game is humility. You can get it spectacularly wrong. Crypto may just be a passing fad or turn out as the new digital gold.’ He adds: ‘No one knows what is going to happen – no matter how much they might claim to be a crypto expert.’
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