Learn what has caused the Bitcoin price to plummet and see if Bitcoin investing has a future. If you are interested in this article, we recommend you read on.
These are hard times for Bitcoin fans in Spain and also for investors relying on other cryptocurrencies. In November 2021, Bitcoin investors were still able to celebrate the record price of 69 000 US dollars, but the joy did not last long. Since then, the value of the currency has fallen by more than 60%. Other cryptocurrencies such as Ethereum also have to accept severe losses. At times, the coin dropped 22% daily, the lowest level since December 2021.
It has become clear that the measures taken by the Fed to date have not been enough to curb the country’s high inflation rate. When this became public on Friday, the bad mood in the financial markets abated significantly. The U.S. dollar has since become more expensive and stock prices have plummeted globally. The Dow Jones, S&P 500 and Nasdaq 100 all plunged massively, with the DAX suffering its biggest daily loss in more than three months.
Bitcoin – No inflation protection
The fact that Bitcoin and company are highly volatile is nothing new. However, during the record-breaking phase last November, some experts already considered them a hedge against inflation. That is no longer the talk of the town: Bitcoin is now far from the record high.
But not only private investors are actively participating in the sale of cryptocurrencies. According to finanzen.net, mining companies are also launching their coins on the market and can be profitable depending on the general description of the cryptocurrency to be launched. Bitcoin mining consumes a lot of energy and is currently becoming a loss-making business for many mining companies in a worsening market environment. So they are selling their holdings: 195,663 coins in May alone, according to Bloomberg. This corresponds to a value of US$6.3 billion.
Risks of investing in Bitcoin
Before making any investments in BTC, you should always be aware of the risks associated with buying cryptocurrencies. The price of bitcoin remains much more volatile than the stock market, for example. Even though many investors are obsessed with watching the bitcoin price, it is always a snapshot and therefore not always very important for the cryptocurrency market in the long run. A less risky way to invest is to exchange Monero to BTC at specialized services with a guarantee.
Factors such as legal regulation, the recognition of Bitcoin as an official means of payment and new waves of bans, such as in China, are much more decisive for the long-term BTC forecast than short-term fluctuations in the BTC price.
Of course, the way the U.S. dollar is managed also plays a role, for example in the form of interest rate hikes by the central bank or similar measures. It is likely that the Bitcoin price will continue to rise in the long term, after all, the maximum amount of issuance is limited, while the amount of US dollars and euros in circulation continues to increase.
Are cryptocurrencies a good investment?
Many investors are currently wondering whether they should take the opportunity to get into Bitcoin at a low price. Analysts and experts disagree on how the crypto market will continue, because unfortunately they too cannot see clearly.
However, many experts assume that things could get even worse before Bitcoin and company recover. The largest cryptocurrency may even reach the next magic mark of $20000.
However, it has become clear that they are not as suitable as a hedge against inflation to the same extent as, say, classic gold. So, if you want to enter the world of cryptocurrencies with this thought, you should think twice before taking this step, because the losses can be huge.
Is it worth investing now or should you wait?
The question many investors are asking today is whether to invest now or wait for better prices. This question is impossible to answer as no one knows what the price will be in a week, a month or even a year. Bitcoin’s value in US dollars is always just a snapshot and depends on too many factors to be able to predict it meaningfully.