Bitcoin is a unique financial asset that has been likened to gold and is thought to one day replace the US dollar as the world’s reserve currency. How did the first peer-to-peer digital money, Bitcoin, transition from a store of value to a reserve currency? How does this impact the notion of investing in bitcoin, furthermore?
This tutorial will cover how to invest in Bitcoin as well as its benefits and drawbacks. The various approaches to doing so to maximise the benefit from price changes will also be examined.
Bitcoin Investing: What Is It?
Even though Bitcoin differs greatly from the majority of other conventional financial assets, there are some investment-related similarities. Although it is a digital asset rather than a physical one, investing in stocks, bonds, currencies, and other such things is analogous to it.
Bitcoin functions as a digital commodity or collectable as opposed to actual commodities like gold or stock. The initial Bitcoin price ever noted was $0.003. After that, in 2021, Bitcoin’s price rose to $60,000.
Given enough time, the price of Bitcoin has steadily increased in the long run. Anyone who purchased Bitcoin since its inception has learned that, if they held onto the asset, they would have made a profit.
Is Bitcoin a Good Investment? A Look Back At 2021 Performance
Investors frequently question if Bitcoin is a viable long-term investment or if the biggest returns have already been realised because of the significant ROI in the past. 2020 was a tremendously successful year for Bitcoin since the pandemic’s stimulus had central banks running their printing machines at full capacity. Due to its limited availability, investors began to pour money into Bitcoin as a result.
Only 21 million BTC will be produced, which causes scarcity, especially in light of the huge US dollar production. People who were concerned about inflation and had cash reserves that were depreciating began purchasing assets, some of which went into the cryptocurrency exchanges. An important upswing started at this point.
The market, however, jumped the gun in 2021 and went above the $60,000 barrier. At that moment, the market began to decline, and as we saw in 2022, Bitcoin’s price dropped significantly. Massive selloffs have occurred in the past, but Bitcoin has managed to recover. Bitcoin is a wager on the disruptive potential of cryptocurrency.
There is potential in uncertainty. This market has seen both overbought and oversold conditions. It’s possible that a recession may force the Federal Reserve to change its monetary policies, which might act as the impetus for the next big Bitcoin bull run.
Investing in Bitcoin in 2022: Is It a Good Idea?
A return on investment of one hundred million percent over the previous ten years demonstrates that buying Bitcoin is nearly always a wise decision. The hard element of optimising returns and earning from the market and its high volatility is deciding when to purchase or sell.
As 2022 has demonstrated, Bitcoin may undoubtedly see a significant decline. However, history has taught us that every time the market has a decline similar to this one, it quickly recovers. At the present, the issues facing the cryptocurrency industry are both internal and external, and if you believe that it will survive, Bitcoin will almost surely continue to be at the forefront.
Bitcoin Fundamental Analysis
Compared to traditional assets, cryptocurrencies like bitcoin and others have distinct fundamental analytical measures. The quantity of activity or hash rate on the network is one of the most crucial ones. After all, it makes sense that demand for a coin would increase as more labour was done on a network.
A different kind of fundamental study will examine the amount of BTC stored on cryptocurrency exchanges and trading platforms. Generally speaking, most analysts think that the lower the amount of Bitcoin stored in these locations, the better, since it indicates that owners are not intending to liquidate their holdings. This hash rate chart illustrates how consistent the increase of users on the Bitcoin platform has been over the previous years, despite volatility and price.
Bitcoin Technical Analysis:
You should bear in mind that technical analysis might be rather arbitrary while viewing charts. However, it provides insight into the “lean” of the market. In the middle of 2022, Bitcoin has seen a significant decline. However, the $12,000 and $20,000 areas also imply the possibility of significant purchasing in those areas, indicating that the decline is almost complete. To put it another way, it may create a fantastic long-term purchasing opportunity.
Bitcoin Sentiment Analysis:
Looking at several factors at once is required for Bitcoin sentiment research. You may look up “purchase crypto” on a search engine to discover how popular it is. Ironically, the higher the price you will likely be the more activity you will likely see. From this statistic, sentiment declined significantly by mid-2022. That’s excellent for the cycle since it implies that many of the “weak hands” have been eliminated.
You might look online to learn what some influential people in your business believe. One of the most renowned billionaire hedge fund managers in the world, Paul Tudor Jones, compares Bitcoin to gold in the 1970s and predicts that it will be the quickest racehorse in the fight against inflation.
Expert Expectations and Bitcoin Price Predictions:
Keep in mind that nobody knows the future. But several industry professionals have made public predictions about what they think the price of bitcoin will be in the future. Although none of these forecasts are certain to come true, they provide some insight into how some industry professionals think the market will behave.
Tim Draper, a venture capitalist, has predicted that Bitcoin will reach a price of $250k over the next two years. He has already scaled back some of that bullishness, though, as the Federal Reserve has switched to a highly hawkish attitude in 2022. Recently, he predicted that over the next 12 to 24 months, Bitcoin prices would be turbulent with a modest positive attitude.
According to Edward Moya, a senior market analyst at Oanda, part of the selling pressure in 2022 is decreasing, but the more significant purchasers could not appear until the year’s end. This parallels the mood witnessed during the previous “crypto winter,” according to him, and some investors are beginning to assume that additional decline could be limited. Like many other experts, he predicts that Bitcoin will breach the $100,000 threshold in the upcoming bull run.
The chief executive of financial advice firm deVere, Nigel Green, recently asserted that the worst of the selling is over and that Bitcoin will rebound along with the stock market.