by Dejan Pekic
Cryptocurrency’s Latest Plunge
Posted by Dejan Pekic
This year has already proved volatile for cryptocurrency, with Bitcoin falling to below US$63,000, its lowest price in five years. In the week leading up to 3 February, the value of Bitcoin fell by about 10% while the second largest crypto, Ethereum, lost about one-fifth of its value. Another popular cryptocurrency, Solana, halved in price.
In what has been termed a ‘crypto winter’, a pattern that occurs roughly every four years and which has previously seen falls of up to 80%, a mass sell-off by investors triggered the plunge. This followed falls in the share market (the S&P 500 and the Nasdaq), and like those, it was likely influenced by economic and geopolitical uncertainty. Interestingly, some experts believe the trough-to-peak performance of cryptocurrency is slowing, reflecting its move from a fringe asset to mainstream market.
As we’ve previously discussed, Bitcoin could best be described as a collectible, with only 21 million able to be mined. So long as there is a group who wants to trade in this limited edition rarity, there will be a price. Conversely, should the appeal wane, there is the potential for the value to evaporate.
While market volatility is natural, it’s important to assess comparable investment options. Had you invested in cryptocurrency in 2021, the most recent fall would mean you have gained nothing. During that time, a similar investment in the US stock market would have seen returns of about 64%. And even taking into account the recent gold market crash, gold value has increased by about 174% in that time.
Regardless of your preference for shares, property or alternatives, at Newealth, we always recommend a diversified investment strategy. We also know that the role of a financial advisor is about more than investments. With holistic advice, and guidance through market shifts, we’ll help provide clarity and confidence in your financial decisions.
General Advice Warning:
The information in this blog is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider whether the information is appropriate for you and seek professional advice before making any financial decisions.
Newealth Pty Ltd ABN 61 091 100 275 | AFSL 231297
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