Why Is Cryptocurrency Market Falling? What Factors Should Investors Keep In Mind? Here's What Experts Say

ABP Live spoke to Mudrex CEO Edul Patel and Unocoin CEO Sathvik Vishwanath to understand what investors should do during the current dip.

Buying the dip is usually considered to be a safe option. But there's no guarantee of recovery.

Source : Roy Buri/Pixabay

The overall cryptocurrency market is currently going through the doldrums. Earlier this year, crypto investors saw a wipeout of $1 trillion in value since last year’s peak, seen in November. While the prices showed some signs of recovery in March, the unprecedented de-pegging of TerraUSD (UST) stablecoin in May and the subsequent meltdown of Terra (LUNA) crypto led to a loss of $40 billion for investors. If we look at historical all-time highs, the world’s most valued crypto, Bitcoin (BTC), has also dipped by over 50 percent.

Why is the crypto market falling? Is this a good time to buy? What factors should investors keep in mind, given the current scenario? ABP Live spoke to Mudrex CEO Edul Patel and Unocoin CEO Sathvik Vishwanath to get a better idea.

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Why is the cryptocurrency market falling?

As per Patel, the crypto market has been on a “bearish consolidation since early April.” He added, “Multiple macroeconomic factors have contributed to this consolidation. Since there was already volatility, the crash of the algorithmic stablecoin LUNA may have added up to the crypto market.”

Vishwanath believes the general volatility of crypto prices is a prime cause for the dip. “What probably can be dedicated to the fall of the crypto market is the volatility, given that it is quite dull even when it comes to the equity and commodity markets as well,” he said.

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Is this a good time to buy the dip?

As is the case with any market-related investment, buying the dip is usually considered to be a safe option as the market generally tends to recover from a low. However, owing to crypto volatility, it is still slightly risky, as per Vishwanath. “A [seasoned] investor only purchases at higher prices. Maybe he can invest now to average its cost.” However, for new investors, this could prove to be a dicey time, as the market “could swing absolutely in any direction.”

Vishwanath also pointed out that the crypto market hasn’t hit the bottom yet. And even if it has indeed hit the bottom, Vishwanath said it’s hard to predict when the market will start recovering.

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Patel, on the other hand, believes this is a “great opportunity for investors looking to stock up on cryptos to DCA.” Those who doesn’t wish to take too much risk, Patel advises to “observe the market movements closely and not jump into impulsive buying activity.”

What factors should an investor keep in mind when planning to invest in the current market scenario?

Thorough research seems to be the order of the day. Patel said, “If investors are willing to invest in the current market, they should do their research and background work thoroughly before investing.”

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Vishwanath reminded that investors should keep in mind the high-risk factor. He said that the invested amount “could get locked for a longer time, up to two to three years.” So, he advises investors to maintain caution.

When will the crypto market bounce back? Which factors will help in that?

Patel noted that this isn’t the first time that the crypto market has crashed. “But with the recent crash, the market may take a bit more time to bounce back. However, with giant companies and countries looking towards adopting cryptos, it can help in a possible bounce back slowly,” the Mudrex CEO said.

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Vishwanath, on the other hand, noted that the crypto market follows the trends of equity markets around the world. “Everything is having a dull time now, so we are not sure when exactly the crypto market will prosper,” he said. “But whenever we have seen bearish markets, it usually lasted 18 to 36 months. We are hoping it should come back in a couple of years. If the present downtrend is actually going to be a dip, we may see a recovery very soon.”