Bitcoin’s incredible success has fueled a rush into crypto investing. Whereas some investors see it as an opportunity to make quick money, others see cryptocurrency as a good way to diversify their portfolio beyond conventional investments such as stocks and bonds.
Why crypto is down in 2022
The crypto crash can be attributed to several factors. One is the Fed, which has made the crypto market anxious as it steps up efforts to combat inflation. The central bank is going to be a more aggressive in hiking interest rates and shrinking its balance sheet, which will eliminate liquidity. As a result, investors will have less money to put toward speculative bets such as cryptocurrencies.
Geopolitical issues are another major factor in the crypto decline. The Russia-Ukraine war continues to be a concern and has prompted some investors to pull their money from cryptocurrency.
Meanwhile, some cryptocurrencies have fallen because of factors affecting them specifically. Dogecoin, for example, tends to follow Elon Musk’s tweets. DOGE fans celebrated when Twitter offered Musk a seat on its board, but then Musk rejected the seat and instead launched a hostile takeover bid for Twitter.
How investors should react to the crypto downturn
If you’re investing for the long term, the crypto downturn shouldn’t worry you much: boom-and-bust cycles are normal for cryptocurrencies. Along that line of thinking, the current downturn could pave the way for a boom, and now might be the time to buy.
It's also worth noting that Bitcoin’s price prediction is particularly impressive. As hedge funds and other large investors adopt it to diversify their portfolio, Bitcoin is forecast exceed $500,000 by 2026 and $1 million by 2030. If those predictions are true, buying the dip now could make you a killing. Ethereum’s prospects also look bright as the network shifts to the energy-efficient proof-of-stake model.
And don't forget about meme coins Dogecoin and Shiba Inu, which stand to benefit from their expansion into DeFi, NFT, and metaverse projects. Shiba Inu's metaverse land project promises to be a major catalyst, and Dogecoin could explode if Musk acquires Twitter and gets the social network to accept DOGE for payments.