Crypto market or kangaroo market: Should you buy the current dips?

New Delhi: Ahead of the much awaited cryptocurrency bill in India, the crypto market has witnessed a sharp decline. Major tokens have taken a big blow in the last few weeks. Behemoths like Bitcoin and Ethereum have retreated as much as a third from their peaks, scaled a month ago. Altcoins have shown a sharper fall.Other major tokens such as Solana, Shiba Inu, Dogecoin, Terra and Polkadot have lost up to 40 per cent of their value in the last one month. Majority of them have been laggards for the last one week, taking double-digit cuts.According to Coinmarketcap, the impact of the recent fall has dragged down the market capitalisation of virtual tokens by about 35 per cent. It was hovering around $2.1 trillion on Tuesday. Furthermore, the daily trading volume of the digital asset class has less than halved, data showed. The daily traded volume is now below $100 billion, whereas assets around $200 billion were exchanging hands a day earlier.However, investors are wondering if they should buy in the ongoing dips or persist with their current risk-off strategy amid the lack of optimism in the crypto market.”Crypto are highly volatile in nature. Current downers are like a Kangaroo Market. I wouldn’t say the dip is signaling bear market currently” said Dileep Seinberg, Founder and CEO, Thinkchain, a blockchain and crypto consulting firm.In a kangaroo market, the asset changes value and “bounces up and down” over a period without any stable rising or declining trends.Hitesh Malviya, founder, itsblockchain, said investors should be cautious and follow risk management practices by putting a major part of the crypto portfolio in stablecoins or in fiat currency. “Bitcoin is retesting key support levels on a weekly time frame, technical charts,” he adds. “If Bitcoin fails to close to the current week above $48,000, then it’s time to start closing positions. Bitcoin will take other altcoins along with it.”Retail sentiments are jittered right now and more pessimistic updates are likely to intensify the selloff. Fundamentals are not supportive, but the situation can change with bullish news inflows. However, retail sentiments are jittered right now and more pessimistic updates are likely to intensify the selloff.Crypto exchanges across the world have seen rising volatility as bulls and bears fight it out in the market and a regulatory overhang continues to haunt the sector. There are multiple factors fuelling this trend, including the US government’s views on cryptocurrencies, risk-off moves by investors, signs of tapering and large movements by new crypto investors.Unnerved by the movements, Indian investors have taken refuge in stablecoins, pegged against the dollar, so that they need not worry about the value changing overnight.Being a Bitcoin maximalist, Seinberg said all crypto revolved around Bitcoin. He was bullish on the crypto behemoth. “It is a good time to invest in the largest digital token as it has the potential to deliver multibagger returns in the next five years.”Seinberg said he was also bullish on Ethereum in the longer run. Among the altcoins, he has picked XRP and Dogecoin due to their speed and adoption.However, the current crypto scene is not attractive for investors. They are squaring off their positions as a hedge against volatility and as collateral to borrow. Considering the ongoing undercurrent in the crypto space, Malviya said he was not anticipating any solid uptrend right now and suggested that investors avoid bets with low risk-rewards.”It is better to avoid unnecessary positions,” he added. “Investors should keenly watch the next direction Bitcoin is taking as the rest of the market will follow just that.”

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Written by mettablog

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