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Hold, sell or buy: What to do when Bitcoin sinks

·3-min read
A Bitcoin sitting on a chart showing a decrease in value
When Bitcoin crashes should you buy it on the dip? (Source: Getty)

You’ve all heard the saying, ‘buy low, sell high’.

This principle is great in theory, but in real life, it can be difficult to action - particularly when some investments - like Bitcoin - haven't seen a high in months.

Bitcoin fell to a 6-month low on Tuesday after a general move away from risky investments saw a mass sell-off. At the time of writing, one Bitcoin was worth $40,485 - that’s more than 50 per cent lower than its April peak of $81,062.

So as an investor, what should you do?

Do I buy Bitcoin in a dip?

If you don’t own Bitcoin, low prices could be enticing you to invest. And of course, this aligns with the general investing principle of ‘buy low, sell high’ that we just mentioned.

But beware of the ill-fated FOMO (fear of missing out). While price may be a factor you consider when investing in any stock, it shouldn’t be the only factor.

Like anything, before you invest in Bitcoin, you need to do your own research. Head to sites like CoinDesk and TheBlockCrypto.com, and read up on the fundamentals of Bitcoin. Listen to podcasts - both for and against Bitcon - and make up your own mind as to whether it’s the right investment for you.

It’s also a good idea to find out what your risk appetite is like.

Bitcoin is inherently risky, and it can be emotionally taxing to ride out the highs and lows. If you don’t think you can hack the rollercoaster, then you might want to consider sitting on the bench for this one, and investing elsewhere.

Do I hold Bitcoin in a dip?

If you already own Bitcoin, recent market dips might have you shaking in your crypto-boots.

However, some experts say that’s just the way the cookie crumbles when it comes to cryptocurrency. Digital asset fund manager at Digital X, Matt Harry, told Yahoo Finance, “volatility is the price you pay to access outsized gains”.

Stephan Livera, Bitcoin expert and podcaster, also told Yahoo Finance he’s seen it all before: he’s been through multiple 80 per cent drawdowns, but believes the possible returns are unbeatable.

“If you want this kind of return, well you're going to have to be able to stomach that volatility and it takes time, it takes learning...and basically taking a long-term view.”

Again, it comes down to your investment principles, and what your research has told you about your investment. If you strongly believe Bitcoin is a long-term investment, and could reach $100,000 as once suspected, then you may want to consider holding your investment.

Do I sell Bitcoin in a dip?

While some investors remain confident about Bitcoin, not everyone has this view.

Earlier this week, Hamish Douglass, the co-founder of one of Australia’s largest fund management firms, Magellan, slammed cryptocurrency as “one of the greatest irrationalities...in a very, very, long period of time”. And he’s not the only nay-sayer.

With regulators across the globe cracking down on Bitcoin mining, price dips may get worse before they get better - but there’s no guarantees it’s going to get better at all.

But that doesn’t necessarily mean you should cash out of your coins and realise your losses.

However, if your emotions are getting the better of you, and your mental health is taking a toll as a result of your investments, then it might not be worth sticking in the game.

Ultimately, it’s about understanding your investment and the associated risks, and then being comfortable with your decision.

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