There were more losers than gainers in the past year, from the pandemic that has changed almost every aspect of our lives. Among those who have profited from these tough times are the people who had invested in cryptocurrencies, and especially in Bitcoin, back before all of this broke loose. The crypto coin’s value at the time of writing is almost 6.5 times greater than what it was exactly a year ago, and almost 10.5 times greater than what it was at its lowest point (mid-March 2020).
Bitcoin is not alone. Ethereum, for example, is 10 times stronger today than its value just a year ago, and altcoins such as Binance, Cardano and even Dogecoin, had all impressed in the past year. With that in mind, it has certainly not all been smooth sailing for Bitcoin and its peers. The past few months especially have been very bumpy, with people wondering if a dramatic downfall in value is to be expected.
Let’s try to look at the past, in order to get a better understanding of Bitcoin’s future. Keep in mind, though, that we’re talking about a projection here, and that no guarantee can be given, hence this is not trading advice, but rather an attempt to get to know Bitcoin better.
The force of trends and influencers
Remember, just a month and a half ago, that Elon Musk had added the hashtag #bitcoin to his Twitter bio? Remember how that sent Bitcoin’s rate up again? If there’s a lesson to be learned from that event, is that a lot of Bitcoin’s value is a result of the buzz around it. In a sense, the crypto coin has become a self-fulfilling prophecy: The more people talk about it and its value, the higher it rises.
That does not mean, though, that it’s all buzz with nothing else behind it. It means that the level of public interest in the coin is very high right now and has been so for almost a year. Having said that, it can be assumed that once Bitcoin becomes less of a hot topic, its value might decline accordingly. The question is when that is expected to happen. The answer is unknown, but we do know that it takes a very sharp eye to notice the exact moment Bitcoin loses its charm (and to act fast accordingly).
Not a ‘come and go’ thing
In direct continuation with the last point, Bitcoin’s days in the limelight are definitely a result of other investment options being unattractive. In other words, the economic crisis that is a result of COVID-19 had investors running away from stocks and currencies that are related and affected by national economies. According to this logic, the moment economies started bouncing back, was the moment Bitcoin was supposed to start losing its charm, and gradually losing its value.
That did not happen, clearly. Not a few months ago, and not even today. It will probably happen at some point in the future, but so far this has proven not to be a zero-sum game between different assets – the rise of traditional venues like stocks and commodities did not lead to a decline in cryptocurrency’s popularity. One may conclude that Bitcoin’s rate is not heavily influenced by the condition of other assets available for investors.
With opportunity comes danger
There is sadly a darker side to the rising power of Bitcoin, along with the enhanced ability to buy and sell it online without a fuss. Thousands of new online Bitcoin scams have been reported recently, popping up like mushrooms after the rain. Furthermore, a lot of websites offering trading services on Bitcoin and other cryptocurrencies are nothing but a fraud.
Normally these websites offer you the ability to trade on the value of the coin without actually buying it (contract for difference style). That way, you don’t have to store the coin in a digital wallet, and you can also make money off of drops in value (what’s called short selling in the trade industry).
However, once no real trading is done, no legislative body is there to supervise the process, leaving a lot of room for dirty tricks.
Many victims of these kinds of fraud testify that brokers have disappeared with their money and cannot be reached by phone or mail. What can you do to prevent this from happening to you? Simple. You should only trade on Bitcoin through authorized and regulated exchanges. That way you have someone at your back, making sure your hard-earned cash is not stolen from you.