Cryptocurrencies experienced jaw-dropping gains earlier this year, but they've taken a beating over the past couple of months.
The price of Bitcoin (CRYPTO: BTC), for example, fell by more than 50% between mid-April and late July. Ethereum (CRYPTO: ETH) has plummeted by around 57% since its peak in May, and Dogecoin (CRYPTO: DOGE) dropped by nearly 70% since reaching its record high.
Recently, however, crypto prices have started to bounce back. Bitcoin, for instance, is up by more than 33% since July 21. Ethereum's price has increased by 28% in that period, and Dogecoin is up by 20%.
Now that cryptocurrency prices seem to be back on an upward trajectory, does that mean it's time to invest? Here's what you need to know.
Will crypto see phenomenal gains once again?
If you missed out on the last crypto craze, it may be tempting to invest in cryptocurrency now to take advantage of this rebound. But there's no guarantee that prices will return to their record-shattering highs.
Before you invest, think about why you're interested in buying cryptocurrency. If it's solely to get rich overnight, that can be a risky move. Investing isn't a “get rich quick” scheme, and putting a lot of money behind an investment that may or may not pay off could be a costly mistake.
On the other hand, if you want to buy crypto because you believe it has a bright future, it doesn't necessarily matter when you invest. The best investing strategy involves taking a long-term approach, so it's wise to buy only if you intend to hold onto your investments for at least several years — if not a few decades.
Because you'll be holding your investments for the long term, it may not make much of a difference whether you buy today, a month from now, or six months from now. In other words, if Bitcoin is eventually worth, say, $500,000 per token, it won't necessarily matter whether you bought it at $35,000 or $40,000 per token. Either way, you could still stand to make a lot of money if crypto succeeds.
Is cryptocurrency right for you?
Nobody knows whether cryptocurrency will succeed over the long run, so it can be a risky investment. For that reason, if you're a risk-averse investor, crypto may not be the right choice for you.
There are ways to limit your risk when buying cryptocurrency, though. For one, you can make sure you have a well-diversified portfolio filled with solid stocks. This way, if your crypto investments don't perform well, the rest of your portfolio will remain strong.
It's also important to only invest money you can realistically afford to lose. Putting your life savings behind cryptocurrency is a recipe for disaster, but investing a small amount that will have little impact on your finances will reduce your risk.
Whether or not you choose to invest in cryptocurrency is a personal decision, and it also depends on your strategy. If you can afford it and are able to tolerate high-risk investments, buying now might be a smart move. But if cryptocurrency isn't right for you, there are plenty of other investments out there.
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