Cryptocurrency has been having a rough year so far. Major cryptocurrencies have watched their prices plummet over the past two months, and the crypto market as a whole has shed nearly $1 trillion since its peak in mid-November.
While falling prices can be concerning, it's also a fantastic opportunity to "buy the dip." Expensive cryptocurrencies like Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) are essentially on sale right now.
Bitcoin is currently priced at $43,000 per token, down from nearly $70,000 in November. Similarly, Ethereum costs around $3,300 per token, a steep fall from its peak of close to $4,900 per token a couple of months ago.
If you've been considering buying crypto, right now is one of the most affordable times to invest. But does that mean it's a smart investment? Here's what you need to know.
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Is crypto a good investment right now?
In general, it can be smart to load up on stocks during market downturns. Stocks tend to be more affordable when the market is down, but there's a good chance prices will rebound once the market recovers.
Cryptocurrency is a little different, however, because it's still highly speculative.
Stocks have a long history of growth over time. As long as you do your research and choose the right investments, it's likely your stocks will recover from downturns and earn positive average returns over time.
With crypto, though, there's no guarantee it will succeed over the long run. Although major cryptocurrencies are developing more utility, most of their growth is still based on their potential real-world uses. In other words, while there's a chance crypto could explode and change society as we know it, there's also a chance it could fail. And right now, nobody knows what will happen.
Should you invest in cryptocurrency?
Crypto isn't necessarily a bad investment. It is risky, though, so be sure you know what you're getting into before you buy.
To decide whether crypto is right for you, consider your tolerance for risk. The price of Bitcoin has fallen by nearly 37% since mid-November, and it's lost more than 80% of its value in the past. If you know that level of volatility will cause you to lose sleep at night, crypto may not be the right investment for you.
It's also important to think about your overall financial situation before you invest. As with any investment, it's best to keep a long-term outlook. Be prepared to keep your money invested for at least a few years, if not decades. Also, don't invest any money you can't afford to lose, and double-check that the rest of your portfolio is well-diversified.
Finally, try your best to keep realistic expectations when investing in crypto. There's no shortage of stories about people who have made millions investing in cryptocurrency, but those instances are the exception rather than the rule.
While you likely won't become a millionaire overnight, it is possible to make money with crypto. It is a risky investment, though, so don't rush to buy simply because it's more affordable right now. If you have a higher tolerance for volatility and can afford to invest, now might be the right opportunity to buy. Otherwise, you may be better off waiting.
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Katie Brockman owns Bitcoin and Ethereum. The Motley Fool owns and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
