Altcoins Are Too Volatile, So Just Buy Bitcoin Instead

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

Unlike most cryptocurrencies that have faced crashes of more than 50%, Bitcoin (BTC-USD) has managed to resist a sudden and harsh selloff. With Bitcoin now breaking above $30,000, it is among the most resistant cryptocurrencies.

However, the recent bearish trend does not look great for crypto, especially for altcoins. In a bullish market, altcoins do great due to their high volatility and low market capitalization. However, a bearish market is a death sentence for altcoins.

While some solid projects may survive, a prolonged bear market would likely be the death blow for a fair chunk of altcoins. Therefore, prioritizing BTC is a wise choice for now.

BTC-USD Bitcoin $32,000

Is Bitcoin Going to Crash?

The crypto market is currently fragile, and investors are rightfully fearful. However, I believe that a sudden crash is not very likely. Bitcoin has continued to remain stable, and it is down by more than 53% from its all-time high. The selloff has cooled down, but Bitcoin could continue a slow decline for a few more weeks before any bullish action.

Bitcoin recently broke out of a bearish descending triangle pattern which can be a sign of some short-term gains. Moreover, BTC has also broken above its $30,000 resistance level and has been holding that level until now.

However, if it falls below $30,000 once again, it is likely to bottom out in June or July. The current price of Bitcoin is undoubtedly low. However, I do not think it is trading at a bargain price just yet. If the stock market continues its downtrend, BTC could bottom out around $25,000.

Bitcoin comfortably traded at $9,000 to 10,000 even before the 2020 bull market significantly increased its popularity. Therefore, I believe that Bitcoin is unlikely to break below $15,000 even in a worst-case scenario crash.

Bitcoin’s Correlation With the Stock Market

Bitcoin has recently seen a strong correlation with the stock market. In the future, it might be even more correlated with the stock market due to large institutional investors.

For example, BTC began its bull market with the pandemic stock boom. However, this correlation is disadvantageous for Bitcoin when the stock market is bearish.

With quantitative tightening in action, the stock market is unlikely to be strong for quite a while. Of course, the market has been green in the short term. However, it is better to be skeptical of the current rally as many more rate hikes are still on the table, and the long-term downtrend could continue. Therefore, the stock market could drag down BTC if it continues its downtrend.

Stick With Bitcoin Until a Market Recovery

The high standard deviation (SD) of altcoins compared to Bitcoin can make them significantly riskier. For example, Ethereum (ETH-USD) has an SD of 4.2. For Dogecoin (DOGE-USD) and Litecoin (LTC-USD), it is 6.5 and 5, respectively. In comparison, Bitcoin’s SD is 3.9, making it more stable.

In addition, many institutional investors are buying Bitcoin at its current price. Thus, BTC is likely to decline far less than altcoins if the bear market continues.

With that in mind, avoiding altcoins is a wise choice for now. If you are investing in crypto, you should prioritize Bitcoin. Moreover, I would recommend against lump sum investments in Bitcoin as the price can still go down.

On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

The post Altcoins Are Too Volatile, So Just Buy Bitcoin Instead appeared first on InvestorPlace.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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