Amid high volatility, top cryptocurrencies continue to give high year-to-date returns

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Cryptocurrencies have become synonymous with volatility now. The way their prices gyrate, they are not meant for the faint-hearted. On May 19, Bitcoin plummeted to around $30,000. Since then, the prices have been recovered and is currently trading at above $40,000 level. It was a big decline for any asset. But a price crash in cryptocurrencies, especially Bitcoin, is not something new. For instance, the year 2017 witnessed one of the worst crashes with Bitcoin prices down to almost $3,000. Similarly in 2013, Bitcoin prices crashed almost by 80%.

Probable reasons

One of the reasons for the recent fluctuations in Bitcoin prices is being attributed to a series of tweets by Elon Musk. He recently tweeted that Bitcoin is not environment friendly, as it takes a lot of energy to mine the virtual currency. The Bitcoin price was trading close to $60,000 when he tweeted on the 12th of May. Since then, the prices have been falling. With China also banning financial institutions from cryptocurrency business a further dent was caused on cryptocurrency prices.

The good news is even after the sharp decline on May 19, most of the cryptocurrencies have recovered and their YTD returns still look healthy. YTD return is the amount of profit realized since the first trading day of the current calendar year. Bitcoin is currently showing a return of 37% since January, Ethereum is at 270%, Binance Coin at 869% and Cardano at 845%. Dogecoin which has recently been in news because of Elon Musk supporting the currency through his tweets has given a whopping return of more than 6,300% since the start of 2021. Polygon, the Indian cryptocurrency, has given a much higher return of 11,646% since Jan 2021.

What should investors do?

With the rates trading much lower than their all-time high, many experts say this could be the right time to buy cryptocurrencies. But with no clear guidelines and regulations in place, especially for first-time investors, it is better to stay away given the high volatility in this asset.