Even though there is a lot of pressure on the market and a lot of uncertainty around the world, Bitcoin (BTC), the biggest cryptocurrency in the world, has been able to stay stable at around $29,000 to $30,000. But there is now a good chance that BTC will get back to where it was and reach $60,000 or more in the near future. This is because the macroeconomy is doing well and inflation is going down.
So, what should you do if you already have Bitcoin in your portfolio? Should you run a mile or have high hopes that Bitcoin will soon bounce back to its best levels?
In this detailed article, we explain what people who want to invest in Bitcoin, which is still selling at 50% less than its highest point, need to do.
What’s Happening to Bitcoin?
Bitcoin (BTC), the king of cryptocurrencies, could have a pretty rough year in 2023. Bitcoin was selling for as little as $16,000 in January. This month, it hit its yearly high of $31,000, making it the first time since 2023 that the market cap was around $600 million.
Due to the state of the U.S. and UK economies and the instability of the market, Bitcoin has once again dropped below $31,000. With the U.S. Fed’s rate hikes and inflation figures, it looks like Bitcoin will be a little bit less valuable in the days to come.
The recent increase in interest rates by the U.S. Federal Reserve is a clear sign that the Fed is still fighting inflation, which may have dampened the spirits of crypto buyers. Jerome Powell, the head of the Federal Reserve, said that the fight against inflation in the U.S. will go on until inflation drops to 2% from its current level of 3%. You must know that almost a year ago, inflation in the U.S. was over 9%.
Some crypto experts, however, think that this is only for the time being and that Bitcoin will continue to go up in the coming days. This is because the much-anticipated “halving” event of Bitcoin is coming up, which will cut the rewards for mining Bitcoin by 50%. This could be one reason why Bitcoin is going up.
Why the Price of Bitcoin Goes Up and Down?
Bitcoin, which started 2022 on a good note, might have reached its peak again by the end of 2022, but bad things happened that caused the price of BTC to fluctuate too much. This caused the price of BTC to drop from $50,000 to $15,000 over the past year.
Recent price changes in Bitcoin and the crypto market as a whole have been caused by macroeconomic factors that are hard to predict and the recent problems in the U.S. banking system. From 2022 to 2023, Bitcoin has gone through a lot of crazy ups and downs. This is because of things like:
- Shaky U.S. banking system
- After the war between Russia and Ukraine
- In wealthy countries, people worry about inflation
- Uncertainty because interest rates are going up in the US and UK
- India has a strict attitude and a strict tax system
- Major cryptocurrency platforms like Bittrex have been shut down because of strict regulations
- The biggest cryptocurrency exchange in the world, FTX, went bankrupt
The reasons above are what caused the price of Bitcoin to go up and down. Back-to-back unexpected and bad events have not only caused big market drops and fear selling, but they have also done a lot to confuse the mood of investors.
What Does Bitcoin’s Fall Mean for Investors in Cryptocurrencies?
Bitcoin is one of the most popular cryptocurrencies. It has also been called an alternative to gold, which means it could be a good way to protect yourself from inflation. In the same way, Bitcoin is the only cryptocurrency that has been widely accepted as a legal way to pay, just like fiat currencies. However, there aren’t very many companies that accept Bitcoin as a payment method.
People who trade in Bitcoin are well aware that digital assets are very volatile and are likely to change even in just 24 hours. This means that even the price of Bitcoin is just based on what buyers think will happen to it in the future. Investors are very sure that the price of Bitcoin could go up just as quickly as it went down.
Experts in the stock market are sure that, because Bitcoin is so unpredictable, it is possible that its price will rise again at some point in the future, which could be in a few weeks, months, or even years. People who like Bitcoin see it as a good way to invest because it helps diversify a portfolio and could give better results than any other type of investment at any time. But before buying Bitcoin, you should know the basics, which can help you make a smart financial choice.
Tips to Think About Before Investing in Bitcoin
- Don’t put all your money in one place. Only 5% to 10% of your general portfolio should be put into cryptocurrencies like Bitcoin
- You should invest the money you can afford to lose
- Like other traditional assets, cryptocurrency should be thought of as an investment in the long run
- Learn how volatile Bitcoin is and then decide if you want to spend
- Find the best time to buy or sell Bitcoin by doing a lot of research
One thing is for sure: Bitcoin is unsteady and unpredictable, with a history of “boom and bust” cycles that have made many people wonder if they should invest in it or not. It is also not controlled like stocks, bonds, or mutual funds, which are more common types of investments. Also, Bitcoin has no value in and of itself. Its value is built entirely on speculation.
So, don’t be afraid to talk to a financial manager. They can help you figure out how much and which cryptocurrencies to invest in based on your financial goals.