September 22, 2023

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Is it time to invest or escape from cryptocurrency?

Is it time to invest or escape from cryptocurrency?

In the past week, the price of Bitcoin plunged and brought fear to investors, who began to question the possibility of more frequent declines in the cryptocurrency. The Bitcoin unit opened in 2022 at $47,700. But already on January 20 it was 40.6 thousand US dollars and it ended on Wednesday (26th) at 37.2 thousand US dollars.

In the face of this currency devaluation, is it time to ditch or invest in cryptocurrencies? And what affected the fall of the most famous digital currency in the world? Analysts consulted UOL They gave their views on the subject and indicated the positions that the investor should take.

For the analysts UOL consulted, this is not a structural thing, but a move influenced by doubts about the resumption of the global economy, due to the omicron variant of covid-19 and in connection with discussions of rate hikes by the Federal Reserve (Fed), the US central bank, as a way to contain rising inflation in the country.

Why is bitcoin dropping?

When the central bank raises interest rates in a country, it is normal for investors to withdraw a portion of the money invested in variable income and invest in options that are considered safer in times of ups and downs, such as fixed income.

This scenario happened in relation to the Federal Reserve (Federal Reserve), which is the US central bank. In turn, the move leads to fewer people investing in US stocks – such as the New York Stock Exchange and Nasdaq technology – and avoiding higher-risk assets – such as bitcoin itself.

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For the co-founder of the financial investment firm Vitreo, George Wassman, the deteriorating macroeconomic scenario in the United States and the subsequent reaction in domestic indices, such as the Nasdaq, were the main reasons for the downfall of the digital currency.

Risk aversion in the traditional market also extended to cryptocurrencies and the correction dragged on. This, along with the fact that Bitcoin lost an important price level, the $40,000 range, pushed the price further lower.
George Washman, find a partner Give vitreous body

Abandon the ship or dive into Bitcoin?

Wassman believes that crypto assets should keep pace with offshore exchanges. Before the resumption, new drops should occur – leading the expert to believe that the price of Bitcoin could range between $28,000 and $30,000. However, settling between 30,000 and 35,000 USD for a longer period is possible. “But that will largely depend on appetite [do investidor] to global risks,” he says.

Raquel Vieira, from analyst house Top Gain, agrees that for her the cryptocurrency has not yet reached its lowest price range. The cryptocurrency specialist remembers, however, that Bitcoin is already very volatile, with variations that can reach anywhere from 10%-40% in the same week.

“But when we have a scenario like the current one, with a pandemic and an increase in interest rates, that ends up complicating and bringing these sharper declines to the market,” Raquel says.

Fernanda Guardian, an analyst at Levante Ideia Investimentos, makes another point. According to her, the recent decline in the value of the currency is a result of the large number of leveraged investors – that is, when the investor works with more value than is available in his account, from the perspective of greater returns.

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“When this happens, liquidations of people who have been betting on the high price may occur, and the market tends to respond in the opposite direction, causing prices to fall,” Fernanda says.

Fernanda thinks that although Bitcoin is independent of economic proxies, it is a high-risk financial asset with many ups and downs, sensitive to changes in perspective in large economies, such as the US and China – as when news broke of the Evergrande bankruptcy. in the Asian country.

With some pressure on the monetary system affecting stocks, bonds and commodities, it is clear that bitcoin will also be affected.
Fernanda Guardian, Analyst at Levante Ideia Investimentos

Is it worth buying bitcoins in an uncertain time?

Roberta Antunes, director of growth at cryptocurrency specialist Hashdex, stresses that Bitcoin’s fall is “natural” at the moment, as it is common for investors to leave risky assets, such as cryptocurrencies, and migrate to fixed income.

In this way, investors must adhere to the structural issues of investing in crypto assets.

“The important thing is to understand that, in the long term, nothing is changing. The fundamentals remain: it is a very promising asset class, with projects growing, technology continues to evolve and there is a growing commitment,” Roberta says.

Wachsmann, of Vitreo, realizes that it is interesting to maintain a good cash position to take advantage of moments of greater decline in the digital currency.

He recommends diversifying the investment portfolio with non-Bitcoin assets. And if you are going to place an order in digital currency, partially make new purchases, as a strategy to get a more attractive average price. He says bitcoin should occupy up to 5% of investors’ portfolio.

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In the opinion of Fernanda Guardian of Levante, if you decide to invest in crypto assets, the investor should evaluate the macroeconomic aspect, stay focused on the long-term and not check prices every day.

“He’s thinking about what bitcoin means as money and sticking to those fundamentals. If an investor looks only at price and profitability, it won’t be enough to achieve calm amid a volatile scenario,” he says.