Contents
- Next up for Bitcoin
- Assets like Bitcoin are dangerous
- Each Bitcoin investor should ask four questions
- Do you know the risk
- How will you adjust to Bitcoin losses
- Are you okay with regulations
- Why purchase bitcoin
Bitcoin broke $69,000 yesterday, hitting a new record. According to CoinMarketCap statistics, the top cryptocurrency has risen approximately 60% since the start of the year. The impending Bitcoin halving and the SEC's clearance of a spot Bitcoin ETF have contributed to its ascent.
The November 2021 cryptocurrency market crash was Bitcoin's final central high point. A series of misfortunes, including the demise of FTX and the collapse of Terraform's Luna, shook the industry, exposing the firms' use of investor funds.
If previous cryptocurrency price drops have hurt you or you're hesitant to buy Bitcoin, you might wonder if this rise is unique and if Bitcoin will continue gaining value. To put it simply, we will have to wait and see.
Next up for Bitcoin
Cryptocurrency investors are likely accustomed to the market's extreme volatility. In contrast to the stock market, extreme price fluctuations occurring within a few days are common in cryptocurrencies. After reaching a record high, Bitcoin fell almost 10% before recovering somewhat and closing the day at over $67,000.
Mike Novogratz of Galaxy Digital and other crypto fans claim this is just the beginning. I find it hard to believe Novogratz was so optimistic about Terraform's Luna that he even got a tattoo of the character before the whole venture crumbled.
Still, Novogratz has company. This is unique, according to several insiders. The spot Bitcoin ETFs have drawn more institutional money, which is known to be stickier, and that's a contributing factor. Also, the possibility that the Federal Reserve may begin decreasing rates soon and that the United States may avoid a recession is gaining more and more support.
Keep in mind that the brighter economic picture and the flood of institutional capital imply nothing about Bitcoin's underlying value. For investors with a longer time horizon, this is the most important consideration.
Assets like Bitcoin are dangerous
I report with great relief the price recovery of Bitcoin and other cryptocurrencies. However, cost does not always indicate worth. Speculation and market sentiment can influence its movements, potentially rendering them arbitrary. Just because Bitcoin has recently recovered from its losses does not mean it is a foolproof investment.
The basics should be considered before purchasing bitcoin. Some people who believe in Bitcoin say that it has the potential to become the internet's digital money. Some say it's similar to digital gold because it's a decentralised store of value. Some worry it will eat into the global remittance sector because it streamlines cross-border money transfers.
Those who are against Bitcoin argue that it is worthless in and of itself. Despite its widespread popularity, only a few people use Bitcoin as currency because of its highly volatile prices. Some believe that criminal activities like ransomware and money laundering are the primary uses of Bitcoin. Additionally, Bitcoin mining uses so much energy that it leaves a carbon imprint equivalent to that of a small nation.
Each Bitcoin investor should ask four questions
Only some people should register an account with a cryptocurrency exchange or invest in one of the new spot Bitcoin ETFs. As with any investment, you must do your homework before purchasing. I have a few questions for you.
- Do you know the risk
We have previously mentioned some of the dangers of cryptocurrency, including its potential for long-term growth and its erratic price movements. Another concern is the need for investors to have comprehensive safeguards. The Federal Deposit Insurance Corporation (FDIC) protects bank accounts against failure, but you can lose all of your money if your cryptocurrency platform goes down.
To lessen this impact, you should store your cryptocurrency in a wallet you are in charge of. However, if you lose your security details, you may lose access to your purse indefinitely.
- How will you adjust to Bitcoin losses
Dealing with financial losses takes work. But limiting your investments to what you can comfortably lose makes it much more doable. When the Luna cryptocurrency on Terra crashed, some individuals lost everything.
Investing in cryptocurrency should only be a fraction of your whole portfolio. Your retirement plans and ability to pay rent or mortgages will remain unaffected in the event of another crypto market crisis.
- Are you okay with regulations
The regulation of the cryptocurrency market is still in its infancy. The SEC believes that several cryptocurrencies are trading as unregulated securities, so it is pursuing lawsuits against multiple prominent crypto exchanges. The outcomes of these lawsuits and other initiatives aimed at enforcing stricter regulation could impact cryptocurrency trading in the United States.
- Why purchase bitcoin
Cryptocurrency was a popular investment in 2021, but many individuals lost much money when prices fell. Just because many people are buying Bitcoin doesn't mean you should. Neither does the possibility of becoming wealthy fast. We know from experience that cryptocurrency values may fluctuate wildly.
You should be transparent about your reasoning for purchasing cryptocurrency and consider how it fits your larger financial objectives. Knowing the "why" behind a price decline makes us less likely to sell in a panic.
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