Bitcoin's position in the crypto market has strengthened significantly in recent months. While there is still a wide range of opinions surrounding it, most experts and analysts are positive, with some expecting BTC to reach $100,000 in the next two to three years. Of course, such forecasts encourage investors to immediately purchase the asset. Is this so clear? The editors of Profinvestment.com figured out whether it is worth buying Bitcoin now and what the arguments are for and against such a move.
Why Bitcoin began to grow at the end of 2020
There are several main reasons for the growth of Bitcoin:
- Breakthrough in technical analysis. Many analysts pointed to $12,500 as the level that needs to be broken to enter the bullish trend. This is due to the fact that in August the cryptocurrency fell sharply after reaching $12,500. In October, it confidently overtook this level.
- The COVID-19 pandemic, which has caused global economic turmoil around the world. In an attempt to prevent or mitigate disasters, governments print money as fast as they can. Of course, this leads to severe inflation, and many people are thinking about safer ways to store their funds than rapidly depreciating fiat.
- A halving occurred in the Bitcoin network, that is, the reward received for successful mining of a block was halved. Now about 900 less BTC is mined every day than before. And the number of traders does not decrease, but only grows. Thus, the jump in the exchange rate is quite justified.
- Expanding institutional participation. In recent weeks, many public companies and hedge funds have entered the crypto market and invested significant amounts of money in it. Thus, the MicroStrategy company announced the purchase of bitcoins in the amount of $250 million, and three weeks later the Square company disclosed the volume of its BTC investments.
All this combined led to growth that is fundamentally different from the growth of 2022 and is more reliable and sustainable.
What you should know about the disadvantages of Bitcoin
Against the backdrop of the constantly presented list of advantages of military-technical cooperation, one should not forget about its disadvantages, and they undoubtedly exist:
- one cannot be completely sure that the value of savings will be preserved;
- high volatility can contribute to both an increase and a sharp decrease in the exchange rate;
- There are high commissions for withdrawal, often up to 5% is lost;
- regulators predict an increase, but in reality a ban from the government may follow - and the user will lose all invested capital.
All innovations usually benefit those who are well acquainted with the intricacies of the process, know workarounds and can operate with a certain amount of funds. As for forecasts, three scenarios can be considered: it will rise in value, fall or remain the same. Time will tell which one will work.
Where will Bitcoin move next - factors, expert opinions
Bitcoin is now in a period where it is building an unprecedentedly large investor base, and negative news has virtually no impact on the community's opinion. Global macro investor Raoul Pal says current demand for Bitcoin is the most dominant he has seen in his life and said he sold all his gold to invest in Bitcoin and Ethereum.
Stanley Druckenmiller, an American billionaire investor, said that he has been working with Bitcoin for a long time. He predicts that BTC will outperform gold in the long term. In his opinion, cryptocurrency works even better than gold, since it is less liquid and more delicately structured. At the same time, Druckenmiller noted that he expects the US dollar to fall in the next 3-4 years.
JP Morgan, whose director three years ago called Bitcoin a scam and promised to fire any of its employees who would engage in cryptocurrency trading, has now agreed to provide banking services to Coinbase and expressed the opinion that Bitcoin, with current trends, is capable of doubling or even tripling its value.
Alpari IAC analyst Vladislav Antonov is convinced that at the moment there is more than 60% probability that the Bitcoin rate will decrease by 30% in the near future. He calculated that in case of parabolic growth (if the price rises to $3,200 in one week), it is better to exit the market to avoid disappointment in the future.
Mikhail Kogan, head of the analytical research department at the Higher School of Financial Management, notes that the sharp increase in the Bitcoin rate is due to the fact that large investors want to hedge against the negative effects of monetary policy observed in the world today. Previously, gold was more actively used for this purpose, but Bitcoin is interesting for its complete autonomy from politics and limited emission.
Anton Kravchenko, CEO of Xena Financial Systems, warns that it is too early to buy BTC, since the decline observed in early December may well be a sign of a downward trend, as a result of which the price will fall below $15,000. Andrey Podolyan, CEO of cryptorg.exchange, remains optimistic about about the fact that the direction of growth will continue, but only if the rate does not fall below $17,000. Yuri Mazur from the data analysis department of CEX.IO Broker predicts a bullish trend when Bitcoin reaches $20,000. Otherwise, a correction can be expected even to $13 000.
Analyst Michael van de Poppe from the Amsterdam Exchange also believes that the coin could drop to $14,000 if the rate drops below the support level ($18,900), which is what happened.
What’s interesting is that institutional investors are more active in the crypto space than retail investors at the moment. The reason for this state of affairs can be said that people are now more careful. Due to the pandemic and political difficulties, many jobs and businesses are at risk. Therefore, if a person does not have enough extra money, then he refrains from high-risk investments. However, compared to previous periods, increased institutional interest is often followed by increased retail demand. If history repeats itself, the growth of BTC in the next year and a half could be impressive.
The main world problem now is coronavirus, we live in difficult circumstances. Oil prices are falling. At the same time, everything indicates that cryptocurrency is an asset that is not correlated with the stock market, and therefore acts as an excellent tool for hedging stock risks. When the world recovers from the panic, it is highly likely that Bitcoin will continue its growth, thereby providing prospects for those who invest now.
What affects the Bitcoin rate
It is not possible to answer the rhetorical question of what will happen to Bitcoin in Russia, even because the formation of its rate is influenced by many factors and the volatility of the cryptocurrency is largely determined by the absence of a regulator.
See also:
What inflation to expect in 2022 and how not to lose your money
The initial confidence of financiers was that the cost level is affected only by the amount of capital investment in organizing a mining farm, the cost of paying for electricity and the amount of commission for transactions.
Fact!
According to some experts, the variability of cryptocurrency valuation is determined by consumer demand (according to the principle: each product costs exactly as much as the buyer is willing to pay for it). And if virtual money had not been so little, and then suddenly inexplicably increased significantly, a drop in value would have been more than likely.
The lack of a regulator, which fiat money has, forces the use of other assessments. Latest news about changes in the exchange rate - no matter whether it rises or falls - is due to the following factors:
- Demand: if there are people willing to buy, the market supply increases in value, and if there are few of them, no one will think of increasing it. In this case, on the contrary, there will be a decrease in order to find a potential buyer.
- Professional marketing: high-quality advertising, skillfully disseminated positive news, clever, unpredictable moves (as was the case with the recognition of Bitcoin as halal). This is the way to awaken the mass interest of the population with the help of the media.
- A sharp increase or decrease in Bitcoin is observed as a result of the action of a pumper - a player with a large amount of assets who buys all orders issued for sale. Its task is to create the illusion of demand, which traders who are not familiar with the intricacies of the game fall for.
Note!
You can influence the exchange rate downward if you sell a certain amount of bitcoins on the exchange for a long time. There is a second option for a collapse, when a large holder unexpectedly parts with part of the crypto capital because he urgently needs cash. In this case, the crypto exchange falls into a fever and panic, a collapse occurs - and in this case the scenario works approximately the same as on the most banal exchange.
Arguments for purchase
Almost every week there is news that some large financial company has shown a loyal, or even purely positive attitude towards Bitcoin.
BlockRock's CIO expressed the opinion that Bitcoin could largely take the place of gold in the modern world. A Citibank analyst published a report that users described as a desire for the moon - in his opinion, BTC could reach $318,000 by the end of 2022. And JP Morgan in its November report claims that corporations are buying three times more cryptocurrency than before in 2022.
According to a November report from Bloomberg, the supply squeeze bodes well for Bitcoin's rise in 2022. The rate is expected to exceed $35,000. Bloomberg also notes a significant drop in the volatility of the crypto market, while, for example, in gold it remains at the same level.
It is impossible not to mention one of the main crypto news of the current year : PayPal will give the opportunity to American users (of whom there are approximately 200 million) to store on
their platform offers cryptocurrencies Bitcoin, Ethereum, Bitcoin Cash, Litecoin (the list may be expanded in the future). Also, from the beginning of 2021, sellers will be able to accept payments for goods or services via PayPal in crypto. For many, this is an easy way to invest without leaving your own wallet. And, of course, this moment can be called a turning point: the use of cryptocurrency as a means of payment is a huge step towards its mass adoption.
MicroStrategy Fund (Morgan Stanley) buys Bitcoin
Michael Saylor’s financial company, MicroStrategy, has been actively purchasing huge amounts of Bitcoin and Ethereuma from crypto exchanges for multimillion-dollar sums since 2022.
Take a look at the chart below showing how MicroStrategy stock has risen since investing in cryptocurrency and wondering if cryptocurrencies are a dud. A company that buys cryptocurrency worth billions of US dollars, 11% of whose shares were recently purchased by Morgan Stanley (an American financial conglomerate with assets of $895.43 billion).
Growth in the value of Microstrategy shares after the start of the purchase of cryptocurrencies
This is what the head of Microstrategy, Michael Saylor, writes about Bitcoin and cryptocurrencies.
“Bitcoin is a bank in cyberspace, run by incorruptible software, offering a global, affordable, simple and secure savings account to billions of people who do not have the ability or desire to manage their own hedge fund.” Michael J. Saylor
