Cryptocurrency has been a very popular word for a long time now. Its uncertainty and unpredictability make it even more intriguing to people. People have been investing in cryptocurrency in a considerable number, profit-maximizer.app.
But is this the right time to invest in crypto? It is a very crucial question because of high inflation and fluctuating stocks. People believe that the prices of cryptocurrency will soar higher this year. Still, the value of Bitcoin, which is the most popular cryptocurrency, has dropped around 20 percent this year. We must also keep in mind that it witnessed its all-time high just three months back.
Now, the question arises: is Bitcoin a risk asset? To clear things, a risk asset is a kind of investment that witnesses a substantial amount of volatility and unpredictability. So, yes, Bitcoin is a risk asset, just like stocks and commodities, because you cannot predict the hike and fall in their prices.
Various economists have stated that the market narrative of avoiding risks is an essential reason for this significant fall in the price of cryptocurrencies. Transparency also does not have the same effect on people because they now realise that they finally have to go out in the real world, and they can’t live in the virtual world forever.
But this isn’t the first time that the price of cryptocurrencies has fallen. The value of Bitcoin fell a good 80 percent in 2017-18. But this drop was before various people had invested in cryptocurrency. Since some very important market giants have entered the cryptocurrency world, this drop has had an even remarkable impact. Hence, a lot of practicality and courage are required to stay loyal to Bitcoin and other cryptocurrencies.
Bitcoin had soared to all-time highs multiple times last year. It ended the year up almost 70 percent. For an asset that is not backed by any national economy, it is a significant return. Nonetheless, it is nothing compared to its return in 2020, which was more than 70 percent then.
The conditions in 2022 are entirely different. Investors are not planning to take risks this year and are rather investing in value-based investments. They are no more interested in the uncertainty of cryptocurrency.
Since all the transparency is drying up, will the demand for crypto currency also die? The fact is that we don’t have any examples from history to deal with the situation of drained transparency, which makes the situation more perplexing.
Geopolitical conditions also drive the volatility and unpredictability of the market. The problem with Bitcoin is that it hasn’t proven itself to be a kind of confinement against anything. In theory, if there is high inflation, the demand for such currency increases. But this fact does not apply to cryptocurrencies. But instead, it is more of a risk asset because of the doubts around it.
Anyways, this situation has not arisen for the first time. Bitcoin has witnessed a 50 per cent drop for the eighth time now, since its inception in 2009. So the regular and long-term investors of Bitcoin are not much affected by this drop. They are, in fact, used to such drops.
When Bitcoin was first introduced, it was believed to be reserved for techno-friendly people. But after multiple published articles and informative videos, Bitcoin has fetched the interest of a lot of people, including the technophobes.
Now, various market giants have entered the crypto game, and it is no more for just the IT sector. In fact, the process of buying Bitcoin has become more accessible and less perplexing. So, it is now accessible to almost everyone.
So, the reason for investing in cryptocurrency is quite apparent: its growth. The growth and development of cryptocurrency in the past years has been awe-inspiring, and it is, hence, a very significant reason for investing in it. The dramatic rise and fall in the prices of cryptocurrency is just a phase, as the investors call it. As the price of Bitcoin would not always remain high, it won’t always remain low either.
So, if you’re planning to invest in cryptocurrency, get ready for a rollercoaster ride of prices.
