The era of digital technologies has come bringing the wind of changes to all the spheres of our life. Thus, the advent of digital money made most people following the charts in order to buy or sell crypto when the conditions are appropriate. Since recently, when the major cryptocurrency saw considerable growth and then a sharp fall, investors have questioned whether Bitcoin is going to collapse. So what are the predictions? What to expect? Read on to discover.
Is Bitcoin worth investing in?
The problem with bitcoin investing is that it instinctively seems too good to be true.
Even long-term cryptocurrency skeptics are becoming hesitant as the dramatic returns are compelling them to consider investing in bitcoin. Jamie Dimon is one of the many prominent crypto bears who have turned bullish in recent years. Some billionaire hedge fund managers, such as Elon Musk, are convinced that bitcoin will continue to increase in value as a digital equivalent of gold in the future.
Are Bitcoins just unprofitable Ponzi schemes, or are they genuinely valuable investments? Would retail investors be wise to pile into Bitcoins? Financial professional opinion remains sharply divided on the crypto market, according to FT Money’s survey. Recently stellar performances have redeemed some bears. Even an ever larger bubble will still be a bubble, say, hard-core naysayers.
Bitcoin’s high volatility makes even the most devoted cryptocurrency enthusiasts hesitant to wager their life savings. The majority of enthusiasts limit themselves to investing 1-2 percent of their portfolio.
Whatever the long-term impact of cryptocurrencies will be, today, they offer fraudsters a rich hunting ground.
In recent weeks, we could observe on the charts of crypto platforms like CEX.IO that the price of Bitcoin has been declining steadily toward $42,000 after approaching $45,000 Thursday.
Following China’s central bank’s declaration that all cryptocurrencies are illegal, cryptocurrency transactions and mining in the country suddenly dropped. Bitcoin’s price has hovered around $45,000 ever since it topped $52,000 on Monday, Sept. 6. It has struggled to return above $50,000 ever since.
Following a drop under $30,000 in July, Bitcoin had been climbing for most of the past few months.
At a time when more and more people are interested in getting in on the cryptocurrency market, Bitcoin’s volatility has been highlighted by its recent move up to $60.000. Bitcoin had risen steadily between the recent low point in July and its high point earlier this month, with several daily highs above $50,000. It’s normal for Bitcoin to have ups and downs, so this is nothing new.
Can crypto investors benefit from this price drop?
A buy-and-hold strategy for crypto investment should be able to handle swings like this in the long run. Expert Humphrey Yang tells Business Insider that recent dips shouldn’t be cause for concern. He avoids checking his investment portfolio during volatile times.
Yang, referring to the ‘crypto crash’ of 2017 that saw many major cryptocurrencies, including Bitcoin, lose value, says that he has been through it as well.
Most experts recommend limiting your investments in cryptocurrencies to less than 5% of your total portfolio. Those swings are likely to continue in the future, says Bill Noble, chief technical analyst at Token Metrics, which analyzes cryptocurrencies.
‘Whether you like volatility or not, it’s here to stay’, Noble asserts. ‘You have to deal with it.’
Yang suggests that as long as your crypto investments don’t conflict with your other financial goals and you only invest what you are prepared to lose, you can follow the same long-term investment strategy: set it and forget it.
Then you may have too much invested in your crypto investments if this type of drop bothers you. Be careful not to invest more than you are comfortable losing. It’s the same advice that stands whether or not the drop is making you rethink your crypto holdings – don’t make any sudden changes or act too rashly.
What is the cause of the recent Bitcoin drop?
The swings in Bitcoin’s price are common among investors, but they pose a challenge for individual investors who must deal with volatility.
Bitcoin’s popularity had grown a great deal since the recent sell-off in 2017.
A new report by Glassnode Insights, a blockchain analysis firm, suggests that new short-term investors are selling their holdings in response to Bitcoin’s drop.
It is unusual for Noble to see such a large swing in an index. In the maturing market, he expected to see these occurrences less frequently and more severely.
There are several factors that may have contributed to this drop, Noble theorizes, including low-quality coins, Elon Musk’s recent negative remarks, and China’s crackdown on crypto services. According to Noble, the response to the sale made it “all the more violent.”
A similar decline occurred in 1987, after which the markets took months to recover. Noble says crypto movements may speed up the recovery, but stocks took longer to recover in the 1980s.
“Don’t panic,” Noble says. “If you keep your positions small, you can try to tolerate the volatility.”
Summarizing the predictions concerning Bitcoin
If we analyze all the events that happened to Bitcoin, we can conclude that:
- Mining is stacked;
- The sector has been re-accumulating since May from experienced investors;
- Small increases in retail sales, but most of them have blown away in May;
- There is a shortage of supplies.
The smart money will win in the end, and a lot of retail investors will lose out. Markets always work this way.
Smart money is still accumulating while retail investors are clearly losing the first round. This is causing a supply shock in the market.
The price of Bitcoin is very likely to surge during an uptrend when the supply runs out, a move that will attract retail investors.
Even though an expert’s opinion tends to be correct in most cases, always be sure to do your own research and verify all these things before you make an investment decision.