Bitcoin sees 30% drop in value: Should you invest now?
What's the story
Bitcoin, the world's largest cryptocurrency, has witnessed a major price correction. From its peak of around $125,000 on October 6, the digital currency has lost over 30% in value. As of today, Bitcoin is trading at $86,174, a decline of nearly 22% in just one month. The broader cryptocurrency market has also taken a hit with over $1.2 trillion wiped off its total market capitalization in the last six weeks alone.
Market influences
Factors contributing to Bitcoin's price drop
The steep decline in Bitcoin prices can be attributed to several factors. One major influence is macroeconomic data from the US, which has made aggressive rate cuts by the Federal Reserve less likely than some traders had anticipated. Concerns over a trade war have also reignited fears of inflation. Further, heavy redemptions of Bitcoin exchange-traded funds (ETFs) in the US have added to this month's market volatility with nearly $3 billion in outflows.
Investment timing
Is this the right time to invest in cryptocurrencies?
The ongoing price correction is viewed as a major adjustment within a longer bull cycle. Investors now face the dilemma of whether to invest at this stage or wait for further corrections. However, just like with stocks, predicting future price movements of cryptocurrencies such as Bitcoin and Ether remains uncertain.
Market trends
Other cryptocurrencies also witness steep falls
The steep fall in prices isn't limited to Bitcoin alone but extends to other major cryptocurrencies as well. Over the past month, Ether has fallen by 28%, XRP by 18.7%, Binance Coin by 23.87%, Solana by 32.91%, Dogecoin by 27.64%, and Cardano by a whopping 37.24%. These figures highlight a broader market trend of declining cryptocurrency values during this period of correction and uncertainty in the crypto space.
Regulatory landscape
Cryptocurrency regulations and taxation in India
In India, while cryptocurrency transactions are taxable at 1%, the sector remains unregulated with no official stance from the government on investing in cryptocurrencies. A Reuters report from September indicated that the Government of India is hesitant to introduce legislation for fear of legitimizing these digital assets. Despite some crypto exchanges facing major hacks and scams, incidents like WazirX's $230 million hack last year haven't deterred all investors from participating in this volatile market.