With Bitcoin prices down 30%, is this the right time to invest in cryptos? Explained

As bitcoin prices have declined substantially, those who were desperately waiting for a correction to happen now have a reason to smile. From its peak (around $1,25,000) achieved on 6 October, this crypto token has lost more than 30%.

Over $1.2 trillion has been lost in the market value of all cryptos in the past 6 weeks alone, reported Reuters, quoting market tracker CoinGecko.

Bitcoin trades at $86,174 on 23 November, which is 22% down in the past one month. Here we give a lowdown on the current downfall of cryptocurrencies and what could investors do given all this.

Why are crypto prices on a decline?

There are several reasons for steep drop in bitcoin prices. The main reason is the macro US data. December Federal Reserve meeting now seems to be less likely to deliver aggressive rate cuts which some traders were expecting.

Additionally, worries over trade war have brought back the inflation fears.

Another reason is heavy redemption of bitcoin ETFs. US spot bitcoin ETFs witnessed around $3 billion in outflows this month alone, reported EBC.com

Amid price fall, is the right time to invest in crytocurrencies?

Whether this is the right or not is not easy to answer because no one knows at what point the correction will stop. The current fall is seen as a deep correction in the longer bull cycle. So, one can either invest now or wait for further correction to happen. However, just like stock prices, no one knows the future price trajectory of cryptocurrencies including bitcoin and ether.

Is the correction seen in other cryptos as well?

Yes, the steep fall is seen among most major cryptocurrencies. In the past one month, Ether fell 28%, XRP 18.70%, Binance Coin 23.87%, Solana 32.91%, Dogecoin 27.64% and Cardano 37.24%, shows CoinDesk data.

Do laws in India allow investing in cryptos?

Although crypto transactions are taxable, it is unregulated sector and the government neither allows nor prohibits investing in cryptocurrencies. Meanwhile, one Reuters report in September this year pointed out the Government of India is reluctant to bring a legislation to avoid giving it ‘legitimacy’.

How much tax one has to pay on crypto investment?

The crypto transactions are taxable at 1% and the sale of cryptocurrencies draw capital gain tax at 30%.

With some crypto exchanges facing major frauds and scams, is this safe now to invest in cryptos?

WazirX faced an untoward hack amounting to over $230 million last year, impacting 4.2 million investors. Sadly, national consumer court rejected a class action suit against the crypto exchange on the grounds that crypto is not a legitimate asset class. Such incidents are unfortunate and shake off the confidence of investors.

Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related decision.

For all personal finance updates, visit here