Bitcoin Investors Continue To Pour In Despite The Risks

Bitcoin has been on somewhat of a roll since its inception back in 2009. Although Bitcoin's trajectory is upward most of the time, the price has a major stumble every few years. These dip periods usually turn out to be a false crisis, with the asset’s value surging even higher than before. Recently, Bitcoin’s value plunged almost 10% falling below $39,000.  While the price has taken a hit, the popularity of this digital coin continues to grow

For those out of the loop; Bitcoin is electronic money that has a decentralized system, working without the interference of any third- parties such as banks or government. It is purely peer-to-peer and is used in transactions. There is a cap of 21 million coins embedded into its founding code by its anonymous creator, Satoshi Nakamoto. Out of this limit, approximately 18.6 million coins have already been mined.

And while the number of available Bitcoins is growing, the demand for them is growing at an even faster rate. This demand has a lot to do with how individual investors are trading. This virtual currency is becoming a lot easier to buy through apps like PayPal, Square, and Robinhood which is drawing more novice retail investors looking for quick returns while trading at home. So far this year, there have been over 38 million small Bitcoin transfers; trades that are less than $1000. This is up from the value of about 20 million in 2017. This potential for higher profits is driving a frenzy of momentum trading and for many investors, these bets are paying off.  The digital asset is up more than 220% this year.

Trading platforms, software, and tools have played an important role in supporting smaller investors. By using powerful Artificial Intelligence (AI) and Machine Learning (ML) along with specialized algorithms, these platforms help traders to make informed decisions and take advantage of short-term crypto booms. The auto-trading feature has proven to be a safe haven for many novice investors looking to try out their luck in the crypto space. You can check out https://bitqt.site/ for more information.

Institutional investors are piling in as well, playing their part in this Bitcoin buzz. A number of public companies are now converting their cash treasuries into cryptocurrency, especially bitcoin. Tesla was recently at the forefront of this crypto buzz when it announced the $1.5 billion investment it made in Bitcoin back in February. It even allowed its consumers to purchase Tesla cars through Bitcoin. However, the statement has been retracted with speculation of Tesla selling its holdings in Bitcoin. MicroStrategy has also made an additional $10 million Bitcoin purchase.

Apart from that, major financial payment behemoths such as PayPal, MasterCard, and Square have also adopted Bitcoin. BNY Mellon, America’s oldest Bank, has also dabbled into cryptocurrency. These investments by financial institutions have further helped support the Bitcoin narrative and reignite the confidence for crypto in those that may have lost it.

As financial systems become more digital, it is leading to Bitcoin becoming more mainstream. But Bitcoin's resurgence is also closely tied to the state of global finance. For instance, when the Covid-19 pandemic hit, Banks pushed down interest rates, in turn, lowering the value of their currencies. And while the price of Bitcoin initially fell, it later surged to new all-time highs while everything else lost value. This has made Bitcoin an effective hedge against the dollar and inflation. Due to Bitcoin’s scarce nature, the more people buy it or the more it gets mined, the more the demand increases, hence, driving up the cryptocurrency value upwards. 

One reason why investing in Bitcoin is so risky is how small the market is. The total value of Bitcoin in circulation right now is around $715 billion. Compared to other major assets, such as Apple which has a value of about $2 trillion dollars, or the Gold market which carries a financial value north of $12 trillion, Bitcoin is still very small. Many consider the digital asset to still be in its prime. Since the market for it is relatively small, it doesn't take a lot of people to push the value up. And the size of this market contributes to the explosive price moves that have occurred since the beginning of this year. 

And until the market matures, experts warn that the market will continue to see volatile swings. However, this highly volatile nature is what got many investors interested in the first place. Although its value has plunged recently, following China's warning against the crypto activity, Bitcoin supporters are patiently waiting for the price to skyrocket again.