Bitcoin saga: Should you buy, hold or sell cryptocurrencies?
The 40% fall in Bitcoin prices make people wonder whether they should buy, hold or sell their holdings
Bitcoin touched an all-time high of $64,895.22 on April 14. More than a month later on 19th May, the cryptocurrency market went into a free-fall mode with Bitcoin prices crashing to almost $30,000 level. Currently, the oldest virtual currency is trading around the level of $38,000. The 40% fall in Bitcoin prices make people wonder whether they should buy, hold or sell their holdings.
The Time Horizon
Experts say the decision to invest should be based on the time horizon. For example, even after the sharp decline on May 19, most of the cryptocurrencies have recovered and their YTD returns still look healthy. YTD return is the amount of profit realized since the first trading day of the current calendar year. Bitcoin is currently showing a return of 29% since January, Ethereum is at 249%, Binance Coin at 785% and Cardano at 755%. Dogecoin which has recently been in news because of Elon Musk supporting the currency through his tweets has given a whopping return of more than 5900% since the start of 2021.
“ If you look at the prices same year last year then prices have risen four times. Anyone who bought for one year is in profit. Whether to hold or sell depend on the investment time. When panic selling started many people saw they were sitting on decent profits, so along with panic selling profit booking also started. Many people who were sitting on fences saw it as a buying opportunity. I will say to closely monitor the situation for 1-2 weeks. Even if you want to buy I will advise you not to do it in one shot, said Nischal Shetty, founder and CEO of WazirX, India’s largest cryptocurrency exchange.
What should one do when Bitcoin prices have shown steep correction? “Next two-three week is going to be crucial after which we will be able to understand the direction of prices. Right now it is a crucial moment. I will say to be cautioned,” said Shetty.
No Banking Access
Cryptocurrency exchanges are also facing a fresh problem of banks pulling the plug on cryptocurrency transactions. Banks have asked payment gateway operators to stop services to merchants trading in cryptocurrencies. Many exchanges have shifted to Peer-2-Peer (P2P) transfer, In this model buyers of cryptocurrencies directly transfer money to the seller of a crypto-currency. Exchanges lock the seller’s crypto in the escrow account and later after confirming with the seller if money has been received the crypto is released to the buyer.
P2P trading is not something new. When the Reserve Bank of India in 2018 imposed a blanket ban on banks from dealing with cryptocurrency exchanges many exchanges had to shut shop. It was during this time an auto-matching P2P engine was created.