Bitcoin’s Price Declines: Are The Sell-Offs Simply Linked To The Market, Or Is There A Larger Problem With What Bitcoin Can Accomplish?
Bitcoin has seen price fluctuations over the last few months. Click here to find out if this is simply linked to the market or part of a larger problem.
At the beginning of May, Bitcoin fell below $30,000, which is a seismic dip when considering its previous price of $69,000 in November 2021. While cryptocurrencies are volatile in their nature, there has been plenty of discussion as to whether this new drop in price is intrinsic to Bitcoin’s existence or part of a problem which runs a little bit deeper.
Since its inception over a decade ago, price fluctuation has been an accepted by-product of crypto investment. While Bitcoin might be sitting on a percentage increase at one stage, the next day the financial market or the mainstream news might send it tumbling from its pedestal. For instance, last year, billionaire businessman Elon Musk tweeted that Bitcoin would no longer be accepted by Tesla due to a concern over the climate situation. This tweet subsequently led to Bitcoin falling by 10%. Similarly, the price of Bitcoin rose not long after due to the growing inflation of the US dollar, causing investors to look for safe-haven assets which would not be affected by traditional financial uncertainty.
For many investing in cryptocurrency, this price fluctuation is simply part of the risk that comes in pursuit of reward. For them, Bitcoin is simply a rollercoaster. One moment you have travelled to its peak, overlooking the green pastures and blue skies, and the next you are shooting down to the ground at almost neck-breaking speeds. The real trick is to stick it out and tell yourself that there will surely be another climb later in the tracks despite the falls and the spirals.
So Is This Decline Linked To The Market, Or Is There A Larger Problem?
To understand why Bitcoin has fallen this year, one must be aware of the more significant financial context of 2022. There have been various world events which could have had an impact on Bitcoin’s scalability, but the most important is the Russian invasion of Ukraine. This war, above all else, has asked a question about Bitcoin’s potential accomplishments. As with any war, the financial market is always affected by major disruptions causing fluctuation and worldwide inflation.
This has also been true of Bitcoin, one of many cryptocurrencies to see an immediate sharp decline in the wake of Russia’s invasion. This is important, seeing as Bitcoin has prided itself on being a natural alternative to the traditional financial market. However, the invasion of Ukraine has indicated that Bitcoin is still correlated to the broader market movements, meaning those invested in it could potentially be affected in the same way that the traditional financial market is affected.
As well as this, the Tether and Terra debacle has also had a ripple effect throughout the world of cryptocurrency. With the stablecoin falling beneath its peg of $1 dollar, many investors have responded by selling off their crypto assets in an effort not to lose out when the blockchain is affected. The act of selling, however, is what has led Bitcoins to fall. The price of Bitcoin, after all, is determined by supply and demand, which means investors are directly implicated in the price that Bitcoin stands at. In this way, the so-called more significant problem should be taken with a pinch of salt.
Bitcoin Is Being Bitcoin
While the implications of the war and the stablecoin debacle do not shed a positive light on Bitcoin, if a coin’s nature is inherently volatile, one must expect shifts in the road to becoming a worldwide asset. Looking once again at Musk’s standpoint on Bitcoin, he stated that Tesla would not be using Bitcoin right now but he believes that crypto is undeniably the way forward in humanity’s financial future.
At the end of the day, this is what truly matters. Right now, the fluctuating rate of Bitcoin is behaving in the way that one should expect it to behave. Falls of 30%, 40%, or even 50% are entirely normal in Bitcoin’s history, and if an investor is not alright with this kind of fluctuation, they shouldn’t be invested in Bitcoin in the first place.
If one is comfortable knowing that we have not seen Bitcoin’s peak, then the falls that have happened over the last year should not be cause for concern when it comes to Bitcoin’s accomplishments. It is not outlandish to assume that, at some point, the market will understand the value of cryptocurrency and create a high-level price for the assets. This means investors must hold firm and be reassured that, while Bitcoin may be falling right now, its tracks are still headed to new, dizzying heights.
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