Are you curious to know why the Bitcoin price is falling?
Bitcoin is the most popular cryptocurrency. The price has been falling for some months after it reached an all-time high of over $63,000 in the middle of April. On June 22, it crashed below $30,000 for the first time since the beginning of 2021 before the price increased slightly.
There’s a lot at stake with this fall. Major corporations, such as PayPal and Fidelity, have invested millions into the crypto industry. Also, thousands of more investors enter the industry every day after imposing lockdowns and the federal government shared stimulus checks.
There are a series of reasons why the demand for Bitcoin is reducing (such as the absurd Elon Musk’s tweets). Seasoned Bitcoin investors may be used to coping with these events. But the newbies need to ask themselves if they can cope with the volatility associated with Bitcoin.
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What’s Happening To Bitcoin At The Moment?
Bitcoin hit an all-time high in the Middle of April 2021 after Coinbase stated that it was going public. This announcement led to months of positive developments in the cryptocurrency world. Then Tesla announced it would accept (and also hold) Bitcoin. Financial institutions such as Fidelity and BNY Mellon also allowed their clients to have easier access to cryptocurrency funds. El Salvador was also accepting Bitcoin as a means of executing financial transactions.
But everything cannot be rosy forever. Musk dealt a big blow on crypto and cited the crypto’s environmental impact as his reason. China also banned crypto mining in most of its regions.
The Colonial Pipeline hack also renewed the attention of Congress to how fraudsters use Bitcoin to scam corporations. The criminals, in this case, were not sophisticated because the Feds were able to recover most of the loot.
The Federal Reserve also affected the growth of Bitcoin when it stated in its Federal Open Markets Committee meeting that it wanted to increase interest rates a bit sooner than expected to prevent inflation from going beyond what was desired. The higher borrowing rate ended up making an investment in speculative assets less appealing; thereby crashing demand.
All these events caused a fall in the demand for Bitcoin among investors.
What Should You Do?
Buying Bitcoin was usually meant for tech-savvy first adopters, then a form of journalism briefly rose to educate perplexed readers (many of whom have no idea what cryptocurrency is and how it works) how they can trade dollars for Bitcoin and then trade Bitcoin for things they use every day.
Over the years, Bitcoin has gained more popularity and has also become easier to buy via secure exchanges like Coinbase and Binance. Now, level-headed money managers, such as those at the Leuthold Group, advised that a percentage point or two of one’s portfolio can be diverted to Bitcoin.
The reason for this is not far-fetched; the high growth of Bitcoin has been amazing and impressive. Despite the current crash in the price of Bitcoin, its price is still higher than the $9,861 it had around June last year.
But the price cannot continue increasing forever.
If you decide to invest in Bitcoin now, you believe that the speculative craze has not reduced and you will be able to sell it later for a higher price. But the lesson learned within March and May should inform you that such plans (although tantalizing) are not easy to achieve.
No one knows when the thrill of speculative investment in Bitcoin will be over.
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