After a turbulent year, bitcoin and ethereum prices are recovering. But some experts aren’t quite ready to say that investors are aware of the recent price swings.
The two biggest cryptocurrencies are still down more than 50% from their all-time highs at the end of last year. Yet, in typical fashion, the crypto market rebounded significantly in July, with the price of bitcoin up over 30% and ethereum up 70% since the market crash in June. Could this signal to investors that Bitcoin and Ethereum have already broken through the lowest price levels of this cycle?
On Wednesday, bitcoin held close to $24,000 and ethereum climbed above $1,800, following the release of new inflation data. Inflation eased slightly from historically high levels in July, leading to a rally in stock and crypto markets. Ethereum price jumped 8% and bitcoin price climbed almost 4% in the last 24 hours.
But some experts are still skeptical about what the recent price increases could mean in the long run.
“The Fed is still tightening and inflation is still elevated, so we can’t be confident of a market turnaround right now,” said Marcus Sotiriou, market analyst at digital asset broker GlobalBlock. “But the fact that [Fed Chairman] Jerome Powell started to say that the rate hikes had a noticeable impact on me, which signals to me that we are in the later stages of this bear market, which we are about eight months into.
Have Bitcoin and Ethereum prices bottomed out?
Bitcoin and Ethereum have been gaining positive momentum for a few weeks now. While bitcoin and ethereum’s price surge has been impressive, the crypto’s ties to the stock market could be a sign of future volatility.
The stock market posted its best performance since 2020 in July and continues to post gains in August, so you can argue that the crypto is currently benefiting from the equity rally, says Scott Sheridan, CEO of brokerage firm Tastyworks. By that same metric, if stocks weaken again, the crypto will likely follow.
“I think if you start to see the market give up some of the recent gains, you’ll probably see something similar in crypto,” Sheridan says.
Crypto educator and market analyst Wendy O is also unconvinced that bitcoin and ethereum have yet to hit their lowest prices of this cycle. O says the market will see “true capitulation later in the bear market,” which she expects will last another one to two years. The capitulation is when investors lose all faith in the price outlook, even after they have fallen. These images show what a capitulation could look like for Bitcoin and Ethereum over the next year, according to O.
While crypto prices are impossible to predict with certainty, O says the signs point to bitcoin and ethereum falling back past their June lows of $17,500 and $900. And continued economic and political uncertainty could create even more volatility in the market over the coming weeks or months.
“In previous bear cycles, both cryptos have corrected 85%,” says O. “I expect Bitcoin to hit $10,000 and Ethereum to $750.”
What Crypto Investors Should Do Amid Continued Volatility
The only guaranteed thing when it comes to crypto investing is volatility. Almost a year ago, the price of bitcoin soared to $68,000 and has now fallen back below $25,000.
These continuous fluctuations are a good reminder that not everyone has a risk tolerance for crypto. If you are curious about crypto, keep in mind that investing in crypto is extremely risky and you should only allocate 5% of your investment portfolio to crypto assets. Even then, only do it if you have a high risk tolerance. There is no guarantee that you will make money – or even get back the money you invested in the crypto market.
Invest only what you would be willing to lose, and only after your other financial priorities are in order, such as saving for emergencies, paying off high-interest debt, and contributing to a retirement plan traditional.
The fluctuations of Bitcoin and Ethereum so far this year show the extreme volatility faced by crypto investors. If you want to invest in crypto or have already put money into bitcoin, experts recommend not to panic over short-term fluctuations and instead focus on the long-term growth potential.