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What investors must do when crypto prices crash

by , 07 October 2019
What investors must do when crypto prices crash
In what was one of the largest 24-hour market sell-offs this year, over $30 billion was dumped from crypto assets.

At one stage, the largest crypto, bitcoin, was down around 20% as its price crashed to a three-month low of just over $7,800.

While, many predicted a huge drop to around $8,000, it was still quite a shock to see it happen.

So what caused the crash and what should crypto investors do right now?
        
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The launch of Bakkt to blame?
 
According to JP Morgn Chase, Bitcoin’s big price drop last week is due, at least partly, to the launch of Bakkt’s Bitcoin futures contracts.
 
A new report from the company said that while futures contracts are a good sign for the future of the crypto market, they resulted in a dropped price for the world’s first cryptocurrency asset – at least for now.
 
“It may be that the listing of physically settled futures contracts (that enables some holders of physical Bitcoin e.g. miners to hedge exposures) has contributed to recent price declines, rather than the low initial volumes.” 
 
Last week, I mentioned that Bakkt’s launch wasn’t too great – just 72 BTC contracts were traded. However, the platform performed better for the rest of the week, with just over 600 BTC contracts traded. 
 
It’s also worth noting that the anaemic launch was expected, as it takes time for institutional investors to jump on board a new trading platform – especially a crypto one.
 
Bitcoin crashes have happened many times in the past and will definitely continue to happen
 
Just like other asset classes experiences crashes, the crypto market is no stranger to them, too. 
 
Just take a look at the chart below…
 
Crypto holders have experienced some enormous drops in the past

 
The three green circles show you massive drops – 15%, 20% - in the crypto market. By now, we are used to it. Remember, the crypto market is still in its infancy. Big drops are expected.
 
Now, look at bitcoin’s recent drop – the red circle. Far from the worst we have seen. Just a blip.
 
Bear in mind too – the price of bitcoin in January was around $3,400. Today’s it’s still over 100% up, which is more than what most shares have returned this year.
 
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So what should avid crypto investors do right now?
  
“Buy the dip.”
 
That’s the message from our crypto expert Sam Volkering
 
You see, Sam’s been making strategic crypto investments since 2011. He has seen it all. Price mania. Panic. Scams. The lot.
 
He has seen his entire stake wiped out many times. And he’s also made substantial profits on cryptos like Ripple and Ethereum.
 
Sam believes investors need to ditch their short-term expectations and take a long-term view on the crypto markets.
 
And he’s not the only one…
 
Analyst at online trading platform eToro, Simon Peters recently said, “Now that bitcoin is now trading below $8,500, it could become an attractive proposition for investors who want to buy the dip. We could see the price rise back up to $10,000 within the space of the next month.”
 
Also, noted commodity trader Peter Brandt predicts bitcoin to be worth $50,000 – a figure seen as conservative by some cryptocurrency advocates.
 
So in short, the lesson is don’t check prices every day. Don’t allow your mood or outlook on life be dictated by a wild market like this. And if you believe cryptos have a future, then use these crashes as an opportunity to buy more.
    
See you next week.
Joshua Benton,
Managing Editor, The South African Investor  


What investors must do when crypto prices crash
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