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What’s happening with the value of Bitcoin?

Many are wondering if there will be a crash in cryptocurrency. It is volatile and has a history of “boom-and-bust” cycles.
It was a rollercoaster ride for the digital currency in 2021. On 10 November 2021, it reached an all-time high of $69,000. However, it has seen a steady decline since 2022 and is now worth around $47,000.

Bitcoin has taken its investors on an incredible rollercoaster ride in 2021. Where is it going next?
Why is crypto falling?

Bitcoin has been experiencing a rollercoaster ride lately, with its value fluctuating between highs and lows depending on the news. It wasn’t the only cryptocurrency that had a turbulent end to 2021.

The uncertainty surrounding a new Covid variant, higher interest rates and continued downturn in global stocks is what has caused a decline in global stocks. This will make it more costly for businesses to borrow money. This uncertainty has also impacted the cryptocurrency market as well as fears about further regulation.

At the beginning of December, bitcoin and other digital assets saw a sharp drop in price. Bitcoin prices fell to $40,000 per coin in early 2022, as cryptocurrencies began to decline again.

There are two factors that could play a role in the Bitcoin price today: China’s ongoing crackdown on crypto and the US interest rate rises. Rumours have also surfaced that Russia might ban crypto operations within the country.
Why is bitcoin so volatile

Bitcoin is not like other types of investments, such as company shares.

Its value doesn’t depend on the performance of a business, but rather whether investors think bitcoin will rise and fall. The price movements are therefore purely based on speculation about the performance of bitcoin.

Bitcoin prices can fluctuate violently even within 24 hours. The price of bitcoin fluctuated due to a variety of factors.
Negative stories

Bitcoin’s price has fallen due to a variety of negative stories and threats to further regulation. These include:

Russia could ban cryptocurrency operations
Elon Musk stated that Tesla would no more accept cryptocurrency payments in May 2021 due to concerns about the environment.
Chinese government imposes sanctions on mining and trading bitcoins in June 2021
Donald Trump later called bitcoin a fraud competing with the dollar to become “the currency of world”
UK banks stop payments to crypto exchanges
FBI agents seize bitcoins worth millions of dollars from criminals
UK’s financial watchdog has blacklisted Binance, the largest cryptocurrency exchange. Santander and HSBC are two of the big banks that have followed suit.
IMF warns about cryptocurrency use – In August, the IMF warned that cryptocurrencies could be used as legal tender in countries. It claimed widespread use could threaten “macroeconomic stability” which could lead to financial instability.
Crypto theft – Crypto hackers Poly Network steal $600m from August, only to return more that a third four days later. They claim they did it “for entertainment” and “expose the vulnerabilities” in the system.

Positive stories

However, there have been positive stories that have driven the price up over the last year.

Morgan Stanley was the first US bank to provide access to bitcoin funds to wealthy clients. However, this was limited to 2.5% of the investor’s net worth as of March 2021.
Elon Musk stated that Tesla would accept bitcoin payments if more than half of its energy comes from renewable sources in June.
Amazon posted a job advertisement for a “digital currency product lead”, prompting speculation that it may soon accept bitcoin payments
El Salvador made bitcoin legal tender

Others stories are mixed about what cryptocurrency means, like the Federal Reserve in the USA, which is considering whether it will launch its own digital currency.

The US President Joe Biden has issued an executive order that aims to coordinate US government actions regarding the regulation of digital assets. Although many crypto enthusiasts think regulation is bad, others believe this executive order can help to develop digital assets and ensure that consumers are protected.

Is bitcoin’s bubble bursting?

A crash is more likely when assets are priced very rapidly and so reach record heights. Or, at the most, a correction. This is when the price drops to a more “normal”.

This seems to be the current situation bitcoin is in.

The cryptocurrency took 11 years to reach $20,000 per coin. It took only three weeks for the price of bitcoin to double.

2013 was a decisive year in crypto investing. The year 2013 was a decisive year for crypto investors. Bitcoin’s value rose from $13.40 to its peak in December at $1,156.10 before plummeting to $760 three days later.

Fast forward to 2021, and the price has risen by more than 700% within 12 months.

It is also uncertain where it will go next.

Is bitcoin on the verge of recovery?

Investing is not a sure thing. Bitcoin can fall as quickly as it rises again.

There are many concerns regarding cryptocurrencies.

China and other countries are facing a crackdown
Global calls for more regulation
Environmental concerns
Its value is solely based on speculation

Additional regulation is seen as a threat the decentralisation and cryptography, which has an impact on price.

Bitcoin’s supporters point out its positive qualities.

Technology that transforms industries
Transacting without the middle man makes transactions simpler and more affordable
Easier global trade
Transactions are more private
It is a safe place to store value as it cannot be printed or taken away
Bitcoin is being touted as an option to gold. This could make it a hedge against inflation.

It is possible that bitcoin could gain momentum again due to its volatile nature. This could happen in the future, perhaps weeks, months, or even years later.

However, no one can predict the future so it is impossible to know for certain whether bitcoin will crash.

If the stock market crashes, will bitcoin rise?

Not necessarily. Bitcoin supporters see it as a diversifier for balanced portfolios. However, it performed no better than stocks during the coronavirus pandemic. Investors panic-sold everything.

Bitcoin fell over 40% in the first two weeks March 2020.

Rosie Bullard, portfolio manager at James Hambro & Partners, notes that “that was when all equity markets took an aggressive leg down due to concerns about Covid-19.”

“So it wasn’t exactly a store-of-value in an equity market reverse.”

“When we looked back at March last year, when the market crashed, bitcoin didn’t suddenly rise in that time.”
Rosie Bullard is a portfolio manager and partner at James Hambro & Partners.

However, the reason financial markets collapsed will determine how crypto assets perform in stock market drops.

Most bitcoin investors believe that it would protect them if there were an inflationary shock like we experienced in 1974.