The Cryptocurrency Market Is In Distress, The Time To Buy Is Now

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The Cryptocurrency Market Is In Distress, The Time To Buy Is Now

A Buying Opportunity Of Historic Proportions

Just when you though cryptocurrencies couldn’t move any lower they do, but for no apparent reason. Bitcoin, Ethereum, Litecoin and the other top ten currencies have all shed nearly 10% in the hours leading up to this post and look like they could keep moving lower. The reason is simple, the public has not come back to the market and may not without some positive catalyst to drive them. The good news is that there are multiple catalysts on the horizon that will help public awareness, perception and availability.

The biggest problem weighing on the minds of traders and the public alike is storage, and hacking. Yet another major exchange has been hacked to the tune of millions and there is no end to the wave of crime in sight. This poses a major problem as it makes owning the coins very risky without even considering the fact they are an emergent technology. If you can’t hold them safely then why hold them all is the general thought. The answer of course is to hold your tokens safely in your desktop based wallet, not in your trading account, and use CFDs to speculate the market.

What this means for buyers, owners and holders of cryptocurrencies is that an historical opportunity is developing. Cryptocurrency prices have entered a zone that many technicians, myself included, never thought they would again. Litecoin is in the lead on the march lower, having broken through a major support level and confirming a bearish triangle. This move is indicative of lower prices and could take LTC/USD down to retest the $50 level it was trading at before the 2020 run-up in price, a potential drop of 45% from current prices.

Ethereum is doing better, having found support well above its long term low. This token is now confirming support at that level and establishing its dominance as a market leader. While LTC is expected to recover as the network expands, ETH is expected to shoot higher later in the year as a trio of major upgrades help it reach scale and improve transaction speed. A move below $475 would be bearish but only in the near term. Longer term ETH is likely to move up and retest its highs.

Aside from technical catalysts, upgrades to the system, both ETH and LTC face regulatory catalysts as well. A recent statement from the SEC, coupled with activity in England, has paved the way for Ethereum and Litecoin based futures products to be listed on US exchanges. Listing on US exchanges means access to institutional traders and enhanced liquidity for the entire cryptocurrency market.

Should You Buy Bitcoin Right Now?

Here are some things to consider if you’re planning to invest in the popular cryptocurrency.

It seems that every time Bitcoin seems like it could break out toward new highs, its price comes plunging back down.

After surging earlier this year, Bitcoin’s price is now down approximately 50% from its highs. In turn, many people are wondering if now is a good time to buy the popular cryptocurrency.

Here are some things to consider before making your decision.

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Image source: Getty Images.

Multiple events that should serve as fuel for gains have failed to prevent Bitcoin’s price from plunging in recent weeks, including the following.

Stock market turmoil

The coronavirus pandemic has unleashed a wave of fear upon the global financial markets. Travel bans, school and business closures, and quarantines have been enacted around the world in an attempt to slow the spread of the disease. Investors, scared that these actions will cause the global economy to fall into a recession, have sold off stocks, leading to sharp losses in markets around the world.

Bitcoin has historically performed well during periods of stock market distress. Some people view Bitcoin as a chaos hedge, or a way to preserve and even increase their wealth when other assets plunged in value. The current market environment can certainly be considered chaotic, yet Bitcoin’s price has plunged right along with stocks. This is disconcerting, as the cryptocurrency’s ability to serve as a hedge against market turmoil is one of its most interesting use cases for investors.

Stimulus measures

To help ward off a recession and reduce the financial toll of the COVID-19 pandemic on the economy, central banks around the world have taken drastic measures to pump liquidity into the markets. While they could potentially help to stimulate the economy, these measures are also likely to deflate the value of the U.S. dollar and other fiat currencies, by increasing the amount of money available.

In many ways, this situation is exactly what Bitcoin was created for. The cryptocurrency has a hard cap on its total supply of approximately 21 million coins. By having a finite supply, Bitcoin was designed to maintain its value while other currencies lost purchasing power due to inflation. But so far, central banks’ stimulus measures have had little effect on Bitcoin’s price, and it’s unclear if they will in the near future.

Greater demand for digital payments

The coronavirus pandemic is also likely to accelerate the trend toward digital forms of value exchange. The World Health Organization is urging people to use contactless payments as a means to reduce the spread of COVID-19. Moreover, with central banks in several nations quarantining physical cash for periods of up to 14 days before releasing it back into circulation — since novel coronavirus can reportedly survive for several days on surfaces — the idea that touching cash could get you sick might lead more people to adopt digital payment technology.

In addition to a store of value, Bitcoin was designed to be “a peer-to-peer electronic cash system.” So one would think that it would be perfectly suited for the current environment. But that’s not yet true. Bitcoin’s current inability to scale effectively makes it largely unsuitable as a payments network. New technologies, such as the Lightning Network, could help in this regard, but they’re not ready for mass adoption just yet. As such, the need for more digital payment options is unlikely to boost Bitcoin’s price any time soon.

Should you buy Bitcoin right now?

For these reasons, you may be best served by waiting to buy Bitcoin until it can better fulfill its primary use cases as a store of value and means of payment. There are certainly some events that could help to drive the cryptocurrency’s price higher in the future, such as the “halvening,” which will cut Bitcoin’s mining rewards in half and reduce its pace of new coin creation. But prices could also continue to fall, so there are plenty of risks to consider if you choose to buy today.

The Cryptocurrency Market Is In Distress, The Time To Buy Is Now

A Buying Opportunity Of Historic Proportions

Just when you though cryptocurrencies couldn’t move any lower they do, but for no apparent reason. Bitcoin, Ethereum, Litecoin and the other top ten currencies have all shed nearly 10% in the hours leading up to this post and look like they could keep moving lower. The reason is simple, the public has not come back to the market and may not without some positive catalyst to drive them. The good news is that there are multiple catalysts on the horizon that will help public awareness, perception and availability.

The biggest problem weighing on the minds of traders and the public alike is storage, and hacking. Yet another major exchange has been hacked to the tune of millions and there is no end to the wave of crime in sight. This poses a major problem as it makes owning the coins very risky without even considering the fact they are an emergent technology. If you can’t hold them safely then why hold them all is the general thought. The answer of course is to hold your tokens safely in your desktop based wallet, not in your trading account, and use CFDs to speculate the market.

What this means for buyers, owners and holders of cryptocurrencies is that an historical opportunity is developing. Cryptocurrency prices have entered a zone that many technicians, myself included, never thought they would again. Litecoin is in the lead on the march lower, having broken through a major support level and confirming a bearish triangle. This move is indicative of lower prices and could take LTC/USD down to retest the $50 level it was trading at before the 2020 run-up in price, a potential drop of 45% from current prices.

Ethereum is doing better, having found support well above its long term low. This token is now confirming support at that level and establishing its dominance as a market leader. While LTC is expected to recover as the network expands, ETH is expected to shoot higher later in the year as a trio of major upgrades help it reach scale and improve transaction speed. A move below $475 would be bearish but only in the near term. Longer term ETH is likely to move up and retest its highs.

Aside from technical catalysts, upgrades to the system, both ETH and LTC face regulatory catalysts as well. A recent statement from the SEC, coupled with activity in England, has paved the way for Ethereum and Litecoin based futures products to be listed on US exchanges. Listing on US exchanges means access to institutional traders and enhanced liquidity for the entire cryptocurrency market.

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