It’s no secret that Bitcoin investors have gone through a rocky ride in the past. The best-known virtual asset, Bitcoin, has been down almost 40% after hitting a record high price of nearly 65,000. But why does this cryptocurrency plunge at some point? Several reasons can explain the falling prices of Bitcoin. For instance, Wall Street sell-off due to inflation fears can spill over. Also, some people are concerned that regulators across the world, including the U.S, could crack down on this virtual asset. Elon Musk, the Tesla CEO, also made comments that are moving Bitcoin prices.
However, some people perceive Bitcoin as a volatile and risky investment. And this is a significant reason for its plunging price. What’s more, Bitcoin is a relatively young and new asset. This virtual currency has been around for about 13 years.
Wasn’t Bitcoin Booming Recently?
Yes. Bitcoin was booming a few months ago. During the coronavirus pandemic, traditional and novice investors flooded platforms like bitcoin champion to purchase Bitcoin. That’s because they saw the cryptocurrency as value storage and a hedge against the inflation that plagues fiat currencies. Crypto exchanges like bitcoin champion allow people to purchase Bitcoin using fiat money. You can also sell your Bitcoins on these platforms. Perhaps, you can check the official site of this platform for more details.
About a year ago, people traded this virtual currency for less than $7,000. Later, this digital currency reached its peak of almost $65,000. Since most people spent more time in their homes with phones in their hands, they researched this digital currency more. What’s more, a significant portion of the human population started trading Bitcoin to earn a living after losing jobs.
Consequently, Bitcoin prices kept increasing. Additionally, some institutional investors started to include Bitcoin in their portfolios. And this enhanced Bitcoin’s legitimacy, leading to the channeling of more money into this virtual currency.
What’s Happening to Bitcoin Now?
Like other cryptocurrencies, Bitcoin lacks insulation against the broader sell-off in the global markets. Recent consumer prices surge sparked consumer concerns about possible inflation, hitting the stock market hard.
Investors fear that the rising prices could prompt the Federal Reserve to increase interest rates. But shouldn’t Bitcoin help investors hedge inflation? Well, that’s the primary Bitcoin enthusiasts’ argument. Some analysts have expressed a contrary opinion.
According to some experts, Bitcoin is a speculative asset. Therefore, a market sell-off can cause a value decrease for this virtual asset. Consequently, Bitcoin differs from gold, which people consider a hedge against government-occasioned inflation.
What about Government Regulations?
Many Bitcoin adherents are skeptical about central banks’ and the governments’ role in a financial system. With the expanding Bitcoin investments, regulatory scrutiny will increase in the crypto space.
For instance, the Treasury Department in the U.S requires businesses to report transfers exceeding $10,000 in cryptocurrencies to the IRS. The Security and Exchange Commission has also noted that the agency will also focus on digital currencies. In China, the central bank has banned all financial institutions from participating in cryptocurrency transactions.
What about Wealthy Investors?
It’s no secret that wealthy investors like Elon Musk have expressed their support for virtual currencies. For instance, many people have associated this Billionaire with Bitcoin. Tesla, the billionaire’s company, bought Bitcoin worth $1.5 billion. What’s more, Tesla accepts Bitcoin payments.
Big Takeaways
Bitcoin is a volatile digital asset or investment. Before investing in this digital currency, take your time to research and understand how it works. But despite the rising and falling prices, Bitcoin’s value has kept increasing. Thus, buying and holding onto Bitcoin today could earn you significant returns after some years.
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