- What are the short-term prospects of Bitcoin assets?
- Why Bitcoin may become the future of the financial system
In recent years, Bitcoin has been the center of attention of both retail investors and outside observers. Many people are still apprehensive about buying cryptos, being afraid that they may drop in value. However, with each new gain in value the value of Bitcoin, they regret their missed opportunity to become a millionaire. Only those who are brave enough to risk end up winning.
The current scenario of Bitcoin development is positive. The first cryptocurrency has already become an institutional financial asset, with its capitalization reaching one trillion dollars. It allows Bitcoin to position itself among the assets with the highest capitalization of all time and in all markets.
The U.S. Securities and Exchange Commission (SEC) keeps postponing the approval of Bitcoin ETFs until the most convenient moment, but in the end, it will happen. Next month, Bitcoin will undergo a major update known as Taproot — it will introduce smart contracts and may cause a major boost in the asset’s value by improving its functionality and efficiency.
A very important factor is the limited supply with decreased accessibility. However, the issuance of the BTC is still decentralized. By the moment China banned Bitcoin mining, it had more than 60% of the world’s mining equipment, getting closer to mining centralization.
When the Chinese government banned Bitcoin mining, it once again became decentralized.
This is very different from the traditional banking system. For example, in the last two years, the Federal Reserve has issued over 38% of the historical monetary base — the decision that had a direct impact on people and the economy.
The fact that the central banks continue to implement quantitative easing and increase the debt ceilings, means that the BTC will continue to develop momentum. This tendency is characteristic of the asset. The objective of cryptocurrencies was to avoid bankruptcy and make the financial system more transparent.
Moreover, there is a negative correlation between the BTC and the DXY. The U.S. dollar index measures the value of the U.S. dollar relative to world currencies. By analyzing their correlation, investors can profit off buying and selling Bitcoin. However, this method only pays off in the long term.
Still, Bitcoin remains extremely vulnerable to short-term negative events regardless of the market. It was recently demonstrated during the Evergrande crisis. When the Chinese conglomerate went bankrupt in September, it caused a decline in global stock markets, including cryptocurrency markets, with Bitcoin falling 7% on the very first day.
Because of that, some experts believe that the BTC is an unstable asset. It seems more reasonable to say that Bitcoin is an asset that is still reaching consolidation in the market. So far, it has not even been in the market for 15 years. Each time the value of Bitcoin drops due to some unrelated circumstances, there is an opportunity to buy this asset at a lower price.
The price of Bitcoin is volatile. It often seems like a very attractive idea to investors, while also scaring them off due to the risks and uncertainty. However, since the invention of Bitcoin, many experts have learned to forecast its growth or decline — at least approximately. Now it seems that we may expect the first cryptocurrency to start growing again.