With Bitcoin and Ethereum Down in Price, Is Now a Good Time To Buy?
According to Arcane Research, Bitcoin delivered crypto investors a healthy 73% return in 2021, while Ethereum surged more than 400% in the same period. In contrast these two cryptocurrencies, the largest by market capitalization ($799 billion and $379 billion respectively), have fallen in price by more than 10% in the past week and are down at least 30% from their all-time highs in November. Although their short-term prices remain bearish, each has notable bullish fundamentals which accounts for their long term investment prospects. Does this mean now is an excellent time for you to buy? Certainly, the profits and losses over the last two months or so suggests that the $35k to $42k range is seen as a sweet spot for Bitcoin buying currently.
Why Bitcoin and Ethereum have massive potential
Despite the short-term pause in price increases, both Bitcoin and Ethereum have two respective “megatrends,” which will likely push their prices higher once more. In the case of Bitcoin, analysts have observed a recent trend involving an average of about 96,000 Bitcoins being moved from significant cryptocurrency exchanges each month, according to data from blockchain analytics firm Glassnode. In its latest report, it called the movement of this transfer “historic”, which points to a significant accumulation trend in Bitcoin that was first detected in March 2020.
BigONE believes that Bitcoin leaving the exchange means that holders of the asset are storing it in their custodial digital wallets for safekeeping, indicating that they will not sell their Bitcoin holdings. Since we know that the supply of Bitcoin is limited, only 21 million, of which 19 million of which have been mined recently, which means that only two million Bitcoins remain to be mined. So as long-term holders (LTH) continue to hold Bitcoin, there will be a shortage of supply in the market. According to Glassnode, long-term holders will continue to keep their Bitcoin holdings despite the shock of market supply shortages. The result is that Bitcoin’s price will inevitably rise in the long-term: “The current market profitability is significantly better off than it was in the 2018 or 2020 bear markets. Back then, LTHs alone held more than 35% of the coin supply at loss. Furthermore, we can see a macro increase in coins held by the less price sensitive LTHs. This is the result of accumulation and LTHs making value acquisitions, whilst also being willing to weather any price drawdowns that follow.”
As for Ethereum, its developers have been working for years to transition from the blockchain’s original proof-of-work (PoW) consensus model to a sustainable proof-of-stake (PoS) model for validating network transactions. An essential purpose of this move is that a percentage of every newly minted ETH token is burned. As a result, its supply is further reduced over time, making it a more deflationary asset like Bitcoin.
The transition from PoW to PoS is known as “ETH 2.0” when the current Ethereum Mainnet will “merge” with the beacon chain proof-of-stake system.
This move will increase the number of transactions per second, reduce the cost per transfer, increase the global scalability of the network, and reduce settlement times. The reduction in cost will also make NFT activity over the layer 1 blockchain more competitive with so-called Ethereum killers such as Solana, which in turn may see a reduction in price when the merge takes place. he long-awaited upgrade is now expected to be deployed sometime later this year Ethereum proponent David Hoffman, admitted the news the merger was not taking place in June was not altogether a surprise: “I should have been expecting it; I get optimistic every single time but the merge won’t be in June but will likely be a few months after.”
Is now a good time to buy Bitcoin and Ethereum?
Given these two significant trends, the future for both of the top cryptocurrency projects by market cap appears bright. Nevertheless, we recommend that investors always do their research when investing in cryptocurrencies and only invest what they can afford to lose. If you are interested in investing in any of these crypto projects a sensible way to do this is to take an average investment approach by using the same amount of money weekly or monthly to build a portfolio over time. Investing in this way of consistently using the same amount can help you average through the peaks and troughs of the market. Of course, its best for investors to invest at a lower entry point if they can, and with these two high-quality cryptocurrencies priced currently over 30% below their past price peaks, this suggests now would be a good time to invest for the long-term.
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