Bitcoin Price Hype: Top 10 Things You Should Know At The Moment!

Bitcoin has been blazing the headlines recently because of hitting the $50,000 per unit price for the first time. This rally has generated a lot of debate on the possibility of the world’s leading virtual currency. But what lies behind this superb growth rate and will it maintain? Here are some facts you should know concerning the present demands in Bitcoin.

Several key factors have contributed to Bitcoin’s meteoric rise: Several key factors have contributed to Bitcoin’s meteoric rise:

• Institutional Adoption: Large market capitalizations such as Tesla, Square and MicroStrategy started buying Bitcoins and this acted as a stamping rod to attract many institutional investors into the cryptocurrency market.
• PayPal Integration: It is important to note that, Bitcoins may now be bought, sold and held in what could be referred to as PayPal accounts which makes it easy for an average customer to know about bitcoins.
• Supply Crunch: The mining reward for new bitcoins was reduced to half in May year 2020 and hence reduced the supply of bitcoins. It implies that the demand has increased while the supply of the product has reduced resulting in increase in prices for the product.
• Weakened Dollar: Concerning this subject, the generality of the central banks around the globe has depreciated fiat currencies such as the USD through the adoption of respirative fiscal policies and quantitative easing. This makes scarce assets like Bitcoin more favourable as a unit of store of value.
• Mainstream Media Hype: It is with the increase in the price of Bitcoin that it receives coverage in the media, due to increased investors willing to invest in it. This, in turn, generates feedback to the effect that prices are bound to rise, and the cycle goes on in a spiral manner.

Bitcoin price Hype: Why Experts Say You Should Be Cautious But Not Ignore It

While the price projections from Bitcoin’s most ardent supporters project figures as astronomical as $100,000 or even $1 million per Bitcoin, many experts urge caution against such unrestrained hype: AS for the most popular Bitcoin enthusiasts and their price recipes, they are simply fantastic, $10,000, $100,000 or even $1 million per Bitcoin, but ordinary skeptics and ordinary knowledgeable experts recommend not to run after dreams and insanely raging prices:

• Volatility Remains High: This is rather important to grasp that bitcoin had several bull cycles before and they were accompanied by 70-80% crashes. Again, the same could easily happen again after such a vertical parabolic rise of the market the same could easily hap.
• Valuations Hard to Justify: Bitcoin cannot be valued like an earning or a dividend just like most stocks because the stock does not have earnings or pay dividends. Because money values are established only in consonance with present prices, which are merely conjectural at the current point in time, it is rather risky.
• Regulatory Uncertainty: The managers in the countries that did not quite grasp the concept of crypto assets may impose rules that can lower the demand for Bitcoin or its price.

Hence in a nutshell, one must underscore that, in the given asset, it is indeed possible to retain ‘live’, in the long run however, the orientation to short-term in the phenomenon might mislead, and, therefore, large risks are still possible. An asset that is as random and volatile as this can only be used, or be present in an investment portfolio, in small proportion with proper risk control.

What Has Caused The New High Today BTC/USD?

Understanding whether Bitcoin’s current bull run is a short-term spike or the start of a long-term breakout requires analyzing key factors:

Institutional Adoption:

Trading using bitcoins is now pass as a news story and it is now the order of the day. Likewise, the major actors such as Tesla intend to spend $1. Statements coming from the mouth of institutions such as stating that 5 billion has been invested in Bitcoin adds credibility implying that it has long term value. Media outlet and large monetary institution can elevate or demote the status and boost the activity of other buyers, thus endowing bitcoin with functionality of a store of value.

Retail Investor Interest:

Interest of retail in Bitcoin is at its highest now and we have seen this pattern before in end of 2017. Though institutions dominate this period, the retail participation has been improved, thus increasing the number of public people engaging in the market. Some sites, for instance, Coinbase has highlighted that it had many new registrations to its platform in 2021. Demand is created by a specific and pronounced effect known as the “Robinhood effect” where inexperienced traders begin investing in Bitcoin.

Limited Bitcoin Supply:

Fiat currency is on the other hand manufactured by the government and in control by the authorities but Bitcoin has limited unit that can be produced and this is limited to 21 million. With 18.6 million already mined and only 2. About 5 million still exist, to be further exploited for the next 120 years. This intrinsic characteristic increases value as more users adopt Bitcoins; thus, less inflation contributes to the asset’s allure.

The Growth Factors or Drivers of Bitcoin Adoption:

Government spending of stimulus bills has resulted to a flooding of fiat money thus reducing its value and equally decreasing stocks, bonds and even saving accounts returns. That is why, investors turn to such assets as Bitcoin and gold due to their proven rarity. Thus, Bitcoin traditionally surpassing gold in performance, is more reliable, convenient and usable in paying for goods and services, making it an ideal hedge against currency devaluation.

Procedures for maintaining the long-term bullish outlook for Bitcoin

Therefore, if the four primary measures outlined above persist to extend to years and decades. then, the present Bitcoin upsurge does look to be grounded in some genuine tonnage. In fact, several widely-cited valuation models project impressive long-term price targets: In fact, there are several popular valuation models that try to paint handsome long-term price targets on it:

Stock-to-Flow Model:

The S2F model works out the value of the assets in question in relation to the inflation rates pertaining to this asset and its scarcity. While it is true that carrying out the same analysis using S2F model reveals that the fair value of Bitcoin in this operation market phase (2020-2024) is $288,000.

Quantitative Valuations:

A quantitative analyst, who goes by the name Plan B, has made slight changes to S2F; he estimates around $288K per Bitcoin by December 2021 and more than $1M in 2025. These are based on the proposition that scarcity based demand will continue to propel it at this rate and exceed supply beyond this period.

Transaction Value Growth:

However, at the same time, Hasu a researcher in the field of cryptocurrencies, said that Bitcoin is promising more growth in comparison with its aim of transactions. Subsequently, he documents the assertion on why it will hit $ 300, 000 by 2025 based on social utility of low inflation money transfer network.

Such a model might sound like a fairy tale today, however, Bitcoin has a main use which other assets do not have and hence behaves characteristically like it has long bull partitions. What stands out in the following is that its monetary worth in the current generation is likely to be caused by a speculative frenzy than the practical application of the technology. Therefore, there is an expectation that price will do so over the years to come as more people incorporate it into their asset portfolio which would put MimbleWimble in direct competition with the Bitcoin.

Some tips to manage your Bitcoin investments:

Based on the volatile price history and uncertain future regulatory outlook for Bitcoin, retail investors should follow certain prudent strategies: Thus, the retail investors should ENLIGHTENED adopt the following strategies Since the price of Bitcoin is unpredictable and the future changes to regulations are unpredictable, investors should wake up and take the following precautions:

1. The Market is Unstable Invest Only What You Can Afford to Lose: In other words Invest your money Wisely and carefully. Bitcoin should still be considered as an active high risk asset class, which at sometime in the future could experience a crash. Spend but a small portion of the total amount of money that one can spend in an attempt to reduce large swings in value.
2. Use Dollar Cost Averaging: Consume large portions regularly, not at the peak of cycles which is during mania phases. Frequency also reduces the possible pitfalls of timing the market meaning buying or selling a security at the wrong time.
3. Hold Long Term: Squeezes are negative to short-term traders given they can be whipped around without the assurance of profits. It is suggested that one should buy Bitcoins with time horizon of 5 to 10 years in order to allow enough time for the utility to manifest into price appreciation.
4. Use Strict Stop Losses: Structural barriers that decide the when and where since when violated the holder’s Bitcoin will be liquidated regardless of the picture. They assist in cutting the losses when a given stock or entire portfolio goes down sharply.

Wrapping Up

As a final note, the mere fact that people get hooked to Bitcoins and there is media product awareness on this new product form, any wise investor should view this as a sure bet that this is the real deal and not a mere fad. By this overall it can be concluded that the basics of Bitcoin have advanced in the past year as far as institutionalization, assimilation into the real economy, and sustainable supply reduction is concerned.

In general, risks remain the same as in Bitcoins with stable and intense price oscillations and uncertainty resulting from the change in legal conditions. On those grounds, what exists in the current markets should be treated with a lot of carefully by retail investors, who should avoid exposing themselves to too much risk adequately manage the risk that exists and invest for the future.

This offers a last view on the aspects that are behind the present Bitcoin bull run and some investment approaches that an average investor should follow regarding the Bitcoin investments, as a result of the present price mania. Please, feel free to write your comments and feedback in the comment section below.

Do visit our other blogs for more insights on various tech topics.

All images featured in this blog post are sourced from Flickr and are used under the Creative Commons license. We at Techcentrals are utilizing these images for fair use, with full rights attributed to the original creators.

---