Bitcoin (CRYPTO: BTC) has sunk 25% since its peak just over a month ago.
The sell-off seemed to be triggered by worries that it has shifted from an inflation-resistant safe haven to a risk asset that correlates to the stock market.
And with volatile commodities like cryptocurrencies, once a few people start selling, others follow, trying to stop further losses.
"The recent selloff was triggered by a wider risk-off sentiment that also impacted many areas of global stock markets," said DeVere Group chief Nigel Green.
"It occurred as inflation is running hot and, therefore, encouraging central banks to tighten monetary policies, putting at risk the liquidity that has benefitted many asset classes, including Bitcoin."
Stop giving Bitcoins away
Green warned investors to stop flogging off their Bitcoins, because it's only making already wealthy people even richer.
"Wealthy, long-term crypto investors typically benefit from spooked panic-sellers by buying their digital currencies on the cheap to enhance their investment portfolios," he said.
"Doesn't a Bitcoin price dip seem especially beneficial to those such investors during these times of worryingly high inflation?"
He added that deep-pocketed cryptocurrency investors always buy the dips.
"This is because they know that digital, global, borderless, decentralised money is, clearly, the future," said Green.
"Bitcoin has almost doubled in value since January 2021. How many other investments can say that?"
Green cited the fact that the third-largest holder of Bitcoin bought more than US$150 million worth during the current correction.
Yes, 2021 was as volatile as any other year for cryptocurrency's flag bearer. But this up and down nature is taken advantage of by those who top up their wallets.
"Could this explain why so many of them send out 'warning shots' about selling crypto when things are a bit turbulent on social media? It seems very likely," said Green.
"Those Bitcoin panic sellers are practically giving away their cryptocurrencies to wealthy buyers who accumulate, accumulate, accumulate."
Bitcoin will return as a safe haven
Despite its behaviour shifting in recent weeks, in the long run Green believes Bitcoin will return to its role of a safe haven against inflation.
This is because Bitcoin is forever limited to a maximum circulation of 21 million coins.
"In this inflationary period, Bitcoin has outperformed gold, which has been almost universally hailed as the ultimate inflation hedge – until now."
Green advised investors to hold onto their Bitcoin with a long-term perspective.
"Prices of Bitcoin and other cryptos can drop by 10% or more in a matter of hours. Indeed, they often do. This is why you need to have a properly diversified portfolio to mitigate risks," he said.
"History shows that Bitcoin gains have been enormous for those who hold."
