Bitcoin’s rollercoaster ride continued this week, plunging to just under $77,000 (£60,000) before rebounding to over $81,000. The flagship cryptocurrency has shed more than a quarter of its value since peaking at $106,000 (£82,000) in January, despite briefly surging to $90,000 last week following President Donald Trump’s executive order establishing a strategic Bitcoin reserve.
Why Is the Market So Unstable?
At the start of the year, optimism was high as Trump pledged to make the U.S. ‘the crypto capital of the world.’ However, investor sentiment has since soured.
Glen Goodman, author of The Crypto Trader, explains: “Trump launched his own coin in January – as did his wife Melania. Some people made an awful lot of money in the first few minutes of its launch, but the majority did not. After initial excitement, the market felt let down – and this has added to a negative sentiment that has affected the market.”
Chris Beauchamp, an analyst at IG Markets, adds: “Talk of crypto reserves got the market excited – it provides a veneer of respectability to initially boost values. But the fall-off in prices indicates uncertainty over what will actually happen.”
Should Bitcoin Be the First Choice for Investors?
A major surprise for investors was the inclusion of alternative cryptocurrencies in the federal reserve. Ethereum, Solana, Cardano, and XRP initially surged alongside Bitcoin, with Ethereum and XRP gaining 11%, Solana jumping 25%, and Cardano soaring over 60%.
However, the market quickly reversed course, with Bitcoin falling 13%, Ethereum losing 16%, XRP dropping 21%, Solana plunging 25%, and Cardano retreating by 30%.
Beauchamp warns: “There is a sense that the inclusion of other cryptos indicates people with outside interests are whispering in Trump’s ear. Having a seal of approval from the President does not necessarily spell good news. The less well-known cryptos are far more illiquid – not so easy to trade.”
Is Now the Time to Buy?
“Buying at such a time of volatility, when Bitcoin has recently been going downwards, is a bit like trying to catch a falling knife,” says Goodman.
Having sold half his crypto holdings when Bitcoin first broke through $100,000, he predicts the value could drop by two-thirds in 2025.
He follows a ‘rinse and repeat’ strategy—buying when prices rise and selling when they decline. However, he cautions against complacency. “It could be hell over the next few weeks and months, as people realise making money in this market is not easy. My understanding is that Trump is going to use taxpayers’ money to buy tokens from crypto investors in the hope it will boost the market.”
How Should New Investors Approach Crypto?
Beauchamp advises newcomers to “drip-feed small amounts of money to understand what is going on in the crypto market.” He suggests that those considering investing £500 should start with £100 and monitor the market.
Many first-time investors who jumped in when Bitcoin crossed the $100,000 threshold may now be experiencing their first major losses. Bitcoin’s history suggests such downturns are not uncommon. After reaching nearly $65,000 in November 2021, the cryptocurrency crashed to $16,000 the following year before recovering. If history repeats itself, Bitcoin could tumble to $25,000 by the end of 2025.
When Is the Right Time to Trade?
Around three-quarters of the 20 million Bitcoins in circulation are held by long-term investors, often referred to as “hodlers” – an acronym for “hold on for dear life.”
Beauchamp notes: “This group might feel sick when markets fall, but over time patience has paid off.”
Danny Scott, CEO of trading platform CoinCorner, advises investors not to stress over short-term price swings. “As far as strategies for predicting the next dip or rise in value are concerned, there is no point losing sleep about whether the price goes up or down in the short term.”
How Can You Start Trading Bitcoin?
Bitcoin can be purchased through online trading platforms like eToro and CoinCorner using a debit or credit card. Investors don’t need to buy a full Bitcoin; they can purchase fractions as small as a ‘Satoshi’—one hundred-millionth of a Bitcoin.
Once bought, Bitcoin is stored in a ‘virtual wallet,’ allowing users to trade as they wish. However, buying and selling cryptocurrency is considered trading rather than investing, as prices can be highly volatile. Unlike traditional investments, cryptocurrencies lack consumer protections, meaning investors risk losing everything if the market crashes.
