Bitcoin and altcoin markets are known for their unpredictability, both internally and externally. This is because of the high volatility that cryptocurrencies have. High volatility means that the price of an asset fluctuates over a wider range. However, prices have the potential to reveal little about the health of a Blockchain network. For example, popular altcoin Solana has dropped 84.6% from its all-time high since the start of 2022. However, the use of the Solana network did not fall, but rather remained stable.
For the risk-averse, it’s daunting that major industry players like hedge fund Three Arrows Capital and debt platform Celsius are filing for bankruptcy. In a sea of FOMO capital allocators and risky investment stories, the criticism that crypto is volatile continues. The narrative has prevented many institutional players from allocating crypto in their portfolios or entering the space. A senior cryptocurrency analyst tried to dodge criticism in an interview. Analyst Thomas Dunleavy explained why the Bitcoin price may not fully recover for another six to nine months. He then talked about how both risk-averse and news investors can manage their portfolios.
Bitcoin rise depends on these developments
According to Dunleavy, macro factors will be a big factor for the recovery of crypto markets. In the past few months, traditional stocks have merged with token prices. With the FED’s attempts to fight inflation, investors are generally wary of risky assets. According to Fed Chairman Jerome Powell, despite negative GDP growth for two consecutive quarters, the US is not in recession. Dunleavy warned those who think negatively about macro factors. According to him, if you think so, now is not an extraordinary time to start risk-asset trading. However, it is possible the Fed will cut interest rates and the US economy will stop feeling the brunt of monetary tightening. In such a scenario, the Bitcoin price has the potential to fully recover, possibly in six to nine months.
However, the analyst says that crypto performance could diverge from stocks due to Ethereum Merge upgrade. Ethereum Merge aims to address common complaints in Blockchain, as we have reported as Kriptokoin.com. The upgrade will lead to faster transaction speeds and better scalability. If executed successfully, Dunleavy says, corporate capital will pile up. After that, he predicts the market will rise significantly.
Watch out for these when investing in cryptocurrencies
Dunleavy says it’s important for new investors to first figure out what percentage of their broader portfolio they’d like to dedicate to crypto. An investor with a classic portfolio mix of 60% stocks and 40% bonds states that between 3% and 5% cryptocurrencies like Bitcoin would make sense. However, the analyst mentions that if he were a new investor, he would definitely put crypto in his portfolio. Dunleavy also advises investors who take a long-term view of their investments. According to him, it’s important for newly cautious investors to look at the dollar-to-cost average. Dunleavy says volatility is high and if you’re going to risk assets, be careful.
In addition, he states that if you believe in Blockchain, you shouldn’t care about price volatility and dips. However, he adds that it hurts when you buy Ethereum at $1,700 and suddenly the price hits $1,400. Finally, investors should learn the nuances of various cryptocurrencies before entering certain altcoins. Dunleavy states that if they did not do this, they could be premature to enter Bitcoin and Ethereum.
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