Are you looking to invest in the crypto industry, but you’re weighing on whether cryptocurrencies such as Bitcoin, Ethereum, and other Altcoins are reliable investment tools?
These cryptocurrencies began over a decade ago. Many crypto enthusiasts term them as market disruptors, while skeptics consider them as risky investments encircled by volatility. However, cryptocurrencies and especially Bitcoin have always hit the headlines for some time now.
After the pandemic emerged in 2020, Bitcoin has experienced a rollercoaster period. In December the same year, Bitcoin price breached the $20,000 mark and later surged to hit over $34,000 as of January 2021.
Moreover, in February 2021, the dominant crypto (Bitcoin) recorded a new all-time high of around $48,000 following a move by Tesla, a large car company to invest $1.5 billion in Bitcoin.
Still, during the same month, Bitcoin picked an uptrend to record a new historical level of above $58,000 before later correcting to below $44,000. The Bitcoin moment picked again in March, where the digital asset breached the $60,000 mark.
So far, many institutional investors have joined the crypto race. For example, on 17 March, Morgan Stanely, a large US-based bank started to accept Bitcoin payments. Also, other companies like Tesla accept Bitcoin payments for their merchandise. Such moves by large institutional investors show the gradual acceptance of Bitcoin within the masses, while many other companies are investing millions of dollars into the crypto sector.
The crypto industry is encircled by misconceptions as Bitcoin was founded under an anonymous account known as Satoshi Nakamoto.
Overview of Bitcoin
Digital currencies like Bitcoin and the process involved in transacting from one individual to another are less complex. More to that it seems like just sending any other payment from one online account to another. These digital coins are supported by robust Blockchain technology, which also serves as a public ledger for recording digital transactions permanently. Unlike other fiat currencies such as the US dollar or the Euro, cryptocurrencies are decentralized. This implies that they are not controlled by state agencies or local central banks.
Digital coins come with many merits. For instance, since they are international-based, their market price remains the same from every corner of the world. Thus, you can send and receive payments worldwide with much ease, while the exchange rates will depend on your preferred platform. Use a crypto heatmap to know about the latest price changes.
For any investment, comes the issue of risk so is the crypto industry. Although cryptocurrencies are considered volatile, many crypto traders buy and sell them when their prices fluctuate to create an alternative income stream using trading platforms such as Immediate-edge.
Bitcoin price performance over previous years
Although the pandemic impacts affected major fiat currencies such as the US dollar, including various cryptocurrencies, Bitcoin rebounded in a brief span to outperform all major assets categories.
From September 2020, Bitcoin price picked a price momentum, which was propelled by investor driven-demand. The uptrend surged further as Paypal disclosed to start allowing their large user base to trade digital coins. As of this writing, Bitcoin’s price is currently trading at $62,330.80, a new all-time high.
Nonetheless, in 2017, Bitcoin recorded a historical high of $20,000, and later registered a bearish trend in 2018.
Many analysts consider the crypto sector as a highly volatile market. To shed some light based on Bitcoin price as a profitable investment tool, including the loss factor, if you invested in Bitcoin in January 2020, you could have generated over 300 percent by year’s end. Also, if you invested in January 2018 and traded off your digital asset by end of the same year, you could have made a considerable loss as Bitcoin recorded a bearish trend in that year.
Many factors cause the crypto prices to plunge and surge fast. In essence, the market values for digital coins as well as other asset categories are quite impacted by supply and demand forces. Also, stiff competition from other emerging cryptocurrencies with distinct features is a major factor. According to many analysts, it’s hard to establish the real factors that impact the crypto prices, which renders cryptocurrencies risky investments.
Is it risky to Invest in Bitcoin?
First, you need to come clean with yourself on why you want to invest in the cryptocurrency market. For example, can you invest in a house from a location with less than 100,000 residents, while the locality is considered to have unpredictable weather patterns like snow or thunderstorms that appear instantly, and the following day the temperature rises quickly? The same case can be said for the crypto industry, especially the Bitcoin price patterns.
Another thing to consider is how you view the loss factor. Before committing any funds, carry out due diligence as the financial industry has its ups and downs and you can run into huge losses.
Many analysts claim that Bitcoin is an alternative investment tool that is encircled by several risk factors. Several cryptocurrencies fluctuate in prices quickly except for stablecoins. Also, a few cryptocurrencies may explode, while others can be associated with fraudulent schemes. However, now and then, digital coins can surge in prices making various crypto traders generate a substantial return.
According to Danny Cox, a financial analyst working with Hargreaves Lansdown company, digital coins can appear ideal, get widespread acceptance, go down the drain, or either way, and any investment is risky.
In addition, Mark Hipperson, the CEO of Ziglu, a crypto platform says that the issue of cryptocurrencies getting widespread acceptance, while international companies like Tesla accept Bitcoin as a payment for their merchandise, there is less doubt that cryptocurrencies will get adopted like other fiat currencies.
When starting an investment, you need to conduct considerable research. The other thing is to ensure you don’t rely only on a single digital coin as there are other cryptos where you can diversify your resources to minimize the risk levels.
Although the crypto industry has its ups and downs, many traders are creating alternative income streams by buying and selling Bitcoin when the price fluctuates. Also, there are many risk factors but you can succeed if you invest wisely with precise strategies.