It seems that every time Bitcoin seems like it could break out toward new highs, its price comes plunging back down.
After surging earlier this year, Bitcoin’s price is now down approximately 50% from its highs. In turn, many people are wondering if now is a good time to buy the popular cryptocurrency.
Here are some things to consider before making your decision.
Multiple events that should serve as fuel for gains have failed to prevent Bitcoin’s price from plunging in recent weeks, including the following.
Stock market turmoil
The coronavirus pandemic has unleashed a wave of fear upon the global financial markets. Travel bans, school and business closures, and quarantines have been enacted around the world in an attempt to slow the spread of the disease. Investors, scared that these actions will cause the global economy to fall into a recession, have sold off stocks, leading to sharp losses in markets around the world.
Bitcoin has historically performed well during periods of stock market distress. Some people view Bitcoin as a chaos hedge, or a way to preserve and even increase their wealth when other assets plunged in value. The current market environment can certainly be considered chaotic, yet Bitcoin’s price has plunged right along with stocks. This is disconcerting, as the cryptocurrency’s ability to serve as a hedge against market turmoil is one of its most interesting use cases for investors.
To help ward off a recession and reduce the financial toll of the COVID-19 pandemic on the economy, central banks around the world have taken drastic measures to pump liquidity into the markets. While they could potentially help to stimulate the economy, these measures are also likely to deflate the value of the U.S. dollar and other…