Bitcoin Finishes 9-Week Downtrend. Should You Buy?

Crypto prices are back in the green today, but a crypto spring has not yet sprung.

Key points

• After a record breaking nine weeks of consecutive losses, Bitcoin’s back in the green.
• It’s too early to call the bottom or assume this marks the end of Bitcoin’s drop.
• Make sure you understand and manage the risks if you want to buy Bitcoin.

Bitcoin (BTC) has been setting records recently, but not in the way that many investors may have hoped. Gone are the days of new all-time highs and extraordinary trading volumes. Instead, Bitcoin just had a nine-week losing streak. This is the longest ever sequence in which the lead crypto has closed out each week at a lower price than the week before.

Today, Bitcoin held its head above $31,000 and was trading at about 5% more than the day before. However, it is still down 56% from its November high. Moreover, according to CoinGecko, Bitcoin lost over 15% in May alone. In that context, ending more than two months of weekly price drops, is a relatively small victory.

Has Bitcoin reached a bottom?

Crypto investors who’ve seen the value of their portfolios drop significantly this year are eagerly watching for an end to this period of depressed prices. However, it is almost impossible to call the bottom of the market. Bear in mind that analysts have been optimistically talking about prices bottoming for months, and it hasn’t happened yet.

The challenge is that the current economic climate is very different from the one we saw last year. There’s a lot less money sloshing around and people are much less willing to take risks. It’s also difficult to use Bitcoin’s price history as an indicator of what might come next. The lead crypto only began trading in 2010, so we have a pretty limited amount of data we can use to draw trends.

Today’s gains and the end to Bitcoin’s losing streak may mark a turning point. But it’s only one day of good news amid a sea of economic uncertainty. There’s a good chance the crypto market has further to fall. Indeed, some analysts predict Bitcoin could sink to $22,000 or lower given the high inflation and possibility of a recession. Plus, we don’t know what impact increased crypto regulation will have.

Should you buy?

The decision to buy crypto comes down to a combination of belief in its long-term potential and your personal financial situation. Even if you think Bitcoin might perform well in the coming five, 10, or 20 years, you still need to be prepared for the worst. Manage the risks so that if Bitcoin fails completely it won’t derail your finances.

In terms of your financial situation, the key question is this: Are your other financial bases covered? That means having an emergency fund that can see you through three to six months’ worth of living expenses, being on top of your retirement contributions, and having some spare cash you can afford to lose. Cryptocurrencies are high-risk investments, so many financial experts advise they only make up a small part of your wider portfolio.

Looking at the long-term potential of Bitcoin, there are no guarantees. Some believe Bitcoin could be the future currency of the internet. Others think it may represent a form of digital gold. Cathie Wood’s Ark Invest predicts it could be worth $1 million by 2030. The investment firm cites its potential to take market share in a number of areas, such as global remittances and acting as an emerging market currency. Crypto skeptics think crypto prices will eventually crash completely.

What matters is that you do your own research and aren’t blinded to the risks by stories of huge potential gains. Almost half the people who bought crypto last year regret their decision. You can avoid being part of next year’s statistics. Don’t rush to buy crypto today just because there’s a slight upturn in prices. Instead, take your time and ensure your crypto purchases are part of a wider investment plan.