Is Now a Good Time to Buy Bitcoin? From $17,000 in December 2022 to a little over $34,000 at the beginning of November, Bitcoin’s value has soared over the previous year. There have been setbacks; for example, in June, Bitcoin’s popularity plummeted to its lowest level since October 2022 due to the publicity surrounding the collapse of the FTX cryptocurrency exchange. However, with the possible launch of spot Bitcoin exchange-traded funds in the US, Bitcoin attention has again gone parabolic as the year winds down.
Will Bitcoin’s value resume its precipitous decline anytime soon, or will this rising trend persist? Both the question and the decision to purchase Bitcoin are complex. It would be best to educate yourself on Bitcoin and the cryptocurrency business as a whole before diving in. Learn the essentials by reading on.
What gives Bitcoin its value?
The anonymous Satoshi Nakamoto established the first cryptocurrency, Bitcoin, in January 2009.
An online replacement for traditional money, it relies on blockchain technology for its validation and security features. To function, blockchain relies on a mix of public and private keys and network consensus; it is a decentralized digital record of transactions. To illustrate how this functions, Google Docs is the ideal comparison. Picture a collaborative paper that is shared with a team. Each team member can view the changes made by any other team member, and the document is always up-to-date. Everyone can undo their edits if the team members don’t like them. Returning to Bitcoin, the primary mechanism by which the digital currency verifies transactions is proof of work. This highly competitive and resource-intensive process is called Bitcoin mining, and it’s what creates new Bitcoins.
You won’t believe how easy it is to use. Hashes, 64-digit encrypted hexadecimal numbers, identify each new “block” added to the blockchain with each Bitcoin transaction. To create an immutable ledger, each block utilizes the hash of the block before it to produce its own. Each new block contains an encrypted hex code that Bitcoin miners try to decipher. The winner gets a modest reward and validates the transaction if they guess correctly. Investors might consider Bitcoin a digital currency, a medium of trade, and a speculative investment. Its distribution is likewise unregulated because there is no central controlling authority. All these things make Bitcoin a risky investment target due to its extreme volatility.
The value of Bitcoin is mainly affected by five things, which is where the volatility comes from.
1. Supply and demand
The fact that 21 million Bitcoins can never be created is common knowledge, and it’s doubtful that this will happen before 2140. There is a cap on the total supply of Bitcoins; every four years, the incentive to mine decreases by half.
Such “halvings” came to a close in May of 2020. Our next one is scheduled for 2024, and it’s possible that demand could skyrocket then, thanks to interest from investors and media. Bitcoin is joining the ranks of other cryptocurrencies in gaining popularity in nations struck by currency devaluation and inflation.
Increasing cybercrime may serve as a demand driver in and of itself because Bitcoin is a perfect tool for financing illegal operations.
2. Production costs
Some claim that Bitcoin’s low production costs are a significant advantage. That being said, it’s not entirely accurate. Some estimate that the total electricity consumption by crypto mining exceeds that of several small nations due to the enormous processing power required to solve even a single hash. Some people think the chip scarcity during the epidemic was mainly because miners bought and used many graphics cards.
When added together, these expenses barely affect Bitcoin’s total worth. Much more consequential are the complexity and extreme variability of Bitcoin’s hashing algorithms.
3. Competition
Over time, Bitcoin’s percentage of the cryptocurrency market has dropped significantly. It kept more than 80% of the market share in 2017. Currently, Bitcoin holds a little more than 52% share of the market.
As a result of its meteoric rise and subsequent decline, Bitcoin is still the most valuable cryptocurrency and the market leader in the industry. We can’t promise this will always be the case. A plethora of competitors to Bitcoin, sometimes referred to as altcoins, have recently emerged.
Ethereum stands out among the rest. Ethereum has seen a market-worth gain of over 15% from last year and now accounts for almost 17% of the crypto market. While some industry watchers predict that Ethereum will eventually surpass Bitcoin in market capitalization, others don’t see it happening anytime soon.
4. Regulations
Despite Bitcoin’s decentralization, it is nonetheless susceptible to government regulations. One example is how the price of a cryptocurrency fell precipitously in response to China’s prohibition on it in 2021, only to recover swiftly in the following months. The European Union and the United States have made similar efforts to outlaw Bitcoin.
The value of Bitcoin may take a significant hit if it were banned in any region.
5. Public interest and media coverage
Bitcoin is highly susceptible to the whims of the public, as are other speculative commodities.
In 2021, this was probably most clearly demonstrated. Elon Musk, CEO of Tesla (NASDAQ: TSLA), tweeted something that day that caused Bitcoin’s price to plummet 30%. The bitcoin market lost around US$365 billion as a result of this.
Will Bitcoin ever go back up?
Bitcoin costs around US$34,400. From US$17,000 in December 2022, this is better. However, Bitcoin’s 2021 value of US$60,000 is far off. What caused the sharp drop? Bitcoin’s precipitous plunge had numerous explanations, according to NASDAQ.
Most important was 2022’s dismal economy. The US Federal Reserve aggressively hiked interest rates to combat inflation and supply shortages. The Ukraine war heightened uncertainty. Most investors curbed discretionary spending and ceased speculating on risky assets. Crypto exchange FTX lost US$1 billion, which angered investors. Many were already suspicious of Bitcoin, and FTX’s failure confirmed that. Mid-January 2023 saw Bitcoin rally from the post-FTX meltdown. Bitcoin has had a great year. Bloomberg says volatility dropped to its lowest since 2020.
No investment is guaranteed, especially with cryptocurrencies. It’s unlikely Bitcoin will crash to zero like Terra Luna. We cannot presume its worth will rise. Asking who determines the answer. If Bitcoin breaks its previous milestone, Gemini’s chief strategy officer, Marshall Beard, predicts a new high of US$100,000. ARK Invest CEO Cathie Wood said Bitcoin might reach $1 million by 2030. Twitter co-founder Jack Dorsey thinks Bitcoin might replace fiat currency.
Cryptopolitan interviewed expert panelists mid-year, who presented conservative yet enthusiastic estimates. They predict Bitcoin will reach $99,781 by 2025 and $270,000 by 2030. Not everyone likes Bitcoin’s future. Bitcoin’s future is uncertain, given geopolitical and economic uncertainty, according to Swyftxt’s head market analyst, Pav Hundal. Billionaire investor Warren Buffet comments on Bitcoin’s possibilities. Buffet finds Bitcoin useless and unproductive. He thinks it’s fake money. He predicts a crypto market crash based on Bitcoin’s history.
Bitcoin is supported by investors and business leaders regardless of their views. MicroStrategy (NASDAQ: MSTR) is the largest public Bitcoin company with 158,245 Bitcoins. Marathon Digital Holdings (NASDAQ: MARA) owns 13,726 Bitcoins and Tesla 10,725.
How to smartly invest in Bitcoin?
The second Bitcoin halving is coming up soon, and the cryptocurrency is more steady than it has been in years. Given the present state of the economy, it could be the ideal moment to invest, provided that you keep in mind the potential dangers.
But what happens when you decide to enter the market?
What is the process for buying Bitcoin?
The bright side is that buying Bitcoin is relatively easy. The procedure is very similar to purchasing stock in a firm if you do it through a stockbroker. If not, you must compile details about yourself and your bank accounts. Before you do any Bitcoin transactions, it is suggested that you secure your network with a VPN.
Signing up for an exchange is the initial move toward buying Bitcoin. Binance and Coinbase Global (NASDAQ: COIN) are among the most well-known, while Kraken and Gemini are other options. Bitfinex is another option if you’re an experienced trader based outside of the US.
After deciding on an exchange, your next step is to acquire a crypto wallet. Many new crypto investors use a “hot” wallet, a software-based storage solution run by the service provider or the cryptocurrency exchange they’ve decided to use. Despite being more accessible and convenient, hot wallets aren’t always the most secure option because data breaches might undermine them.
An alternative is a “cold” wallet, hardware optimized for storing cryptocurrency. A purpose-built flash drive is essentially what it is. A cold wallet is recommended for those who intend to invest substantial sums of money into cryptocurrency.
You can link your bank account with your cryptocurrency wallet or cryptocurrency exchange account after you have obtained and set up your wallet. Just so you know, this isn’t required, and some seasoned investors choose not to do it.
After setting up your exchange account and wallet, you’re ready to place your order.
Best practices for investing in Bitcoin.
The most critical thing to remember is Bitcoin is a high-risk asset. Put no more money on the line than you can afford to lose. Bitcoin is not an all-or-nothing bet but a way to gradually increase wealth.
Hedging your portfolio is crucial, just like with any other investment. Cryptocurrencies like Bitcoin are significant, but you should consider putting your money into Ethereum or another altcoin. Since even the most reliable cryptocurrencies may be somewhat unpredictable, you might also want to look into other blockchain-based investments.
Don’t get caught up in all the cryptocurrency hype, either. Think back to 2022, when non-fungible tokens caused a mini-panic. The value of those assets has reached Allen’s all-time high. Act on the results of your market research and the recommendations of reliable and qualified experts. If you put it up in response to an influencer’s tweets, you are gambling with your money.
Also, take baby steps. As a general guideline, you shouldn’t put more than 10% of your money into cryptocurrencies. Remember that moderation is essential—even that number could be high. Cybersecurity should also be a top priority. Criminals who operate online often target cryptocurrency markets. Remember that good security hygiene includes keeping your cryptocurrency in a cold wallet. Using a virtual private network (VPN), a password manager, and careful web browsing and downloading practices all fall under this category.
Lastly, try to educate yourself on cryptocurrency and how it functions. Since many of his investors were confused about the nature of FTX, Sam Bankman-Fried was able to keep the company afloat for a long time. Keep your wits about you and ignore all the hype surrounding Web3 and the metaverse. Please get to know the underlying technology by doing some reading on it. Then you’ll know whether something is a good investment and when it’s a waste of money.
When should you buy and sell Bitcoin?
In most respects, Bitcoin follows the same regulations as any other investment. The rule of thumb is to purchase cheap and sell high. That is sometimes easier said than done, though, due to the extreme volatility of Bitcoin’s value.
Keeping an eye on the market and taking expert advice are wise moves.
What is indirect crypto investing?
You may hesitate to invest directly in Bitcoin due to its volatility. Fortunately, it is not necessary. Mutual funds, equities, and exchange-traded funds (ETFs) are ways to participate in the cryptocurrency market indirectly.
Before you go on this path, it’s a good idea to talk to a financial advisor or stockbroker and do some research.
Investor takeaway
The asset known as Bitcoin is intriguing. Since its introduction to the market, investors have been interested in this commodity, a transactional tool and a speculative investment. Regrettably, it is also highly unpredictable.
Bitcoin is an asset that you should acquire at your own risk, even though the market conditions are favorable for doing so at the moment. You run the risk of losing most of your investment even though Bitcoin offers the possibility of substantial rewards. Feel free to buy away if that information doesn’t annoy you.
