Cryptocurrencies had their moment in 2017 when during the crypto boom Bitcoin almost reached the unbelievable back then height of $20,000, stopping at $19,783. Since then, Bitcoin dropped over 80% to $3,500 in 2018 in a crypto market crash that exceeded the Dot-com bubble’s collapse in the late 90’s.
However, in 2020, Bitcoin began its slow and steady growth. Currently one BTC equals to more than $46,000. While many still believe cryptocurrencies to be a bubble and their value to be exaggerated, others continue speculating, purchasing and selling them or even holding consistently through the years. While each trader has to make up their own mind about whether to enter the crypto market or not, here are the main points to consider when making this decision.
Crypto might become universally acceptable
Many companies are fusing Bitcoin and other cryptocurrencies into their business. For instance, PayPal has become one of the latest companies to launch a new service, allowing their US users to buy, sell and hold crypto currencies directly through their PayPal wallet. PayPal motivates their decision by the spreading popularity of using digital currencies driven by COVID-19.
Tesla has just confirmed purchasing $1.5 billion worth of bitcoins in order to “diversify and maximize returns” on funds that are not crucial for the company’s maintenance. Moreover, Tesla announced that it expects to begin accepting bitcoins as a payment method for their products in the near future, though on limited terms at first.
Even certain banks are slowly jumping aboard the crypto trend. All this means that crypto is becoming more and more accessible. That’s why there are more people interested in it now.
Limited amount of BTC
The supply of bitcoins is limited to 21 million and the amount of over 18.5 million of bitcoins has already been mined.
Even though the maximum amount won’t be in circulation until 2140, the supply decreases while demand rises, forcing the value of this cryptocurrency to grow. A spiking demand for cryptocurrencies might boost Bitcoin’s price even more, especially with its mass adoption as a payment method.
Crypto may be a hedge against deflation
While the value of fiat currencies, especially the US dollar, is decreasing due to the pandemic consequences, the price of goods are spiking. Many investors, including major companies, believe BTC to be a hedge against deflation since due to its decentralized nature it can’t be devalued like fiat currencies.
High volatility and risk
Even though there is a reason why cryptocurrency remains an attractive instrument for many traders, it is important to highlight its volatility. While periods of quick rise mean potential returns for traders, too often these spikes are followed by sharp declines. While it may not be necessarily true for every crypto, Bitcoin is surely not alone in its volatile movement.
Many investors make their predictions and estimate a further rise for bitcoin, some name such figures as $100,000 and $150,000. However, while big companies like Tesla or Square acquire the cryptocurrency and send it soaring, any trader or holder that decides to diversify their portfolio with bitcoin needs to do their own research and be prepared for losses.
What is your opinion about the new cryptocurrency boom? Let us know what you think in the comments below!