Despite temporarily halving its value last week, Bitcoin is still going through double-digit intraday moves. And Wall Street strategists predict that this crazy run won’t be over anytime soon.
It has been a rude awakening for bitcoin supporters and investors who thought they could take this volatile crypto beast. Last Wednesday, the world’s largest digital currency suffered a 30% drop in one day, falling to about $30,000. Just in mid-April, bitcoin hit a record high of over $63,000. Despite crypto’s reputation for turbulence, it was still considered quite dramatic. The last time bitcoin experienced a decline of this magnitude was in March 2020 at the height of the Covid pandemic. But even then, trading was not as jarring.
Bitcoin’s closing prices have been fluctuating by 5% or more 39 times so far this year, according to reports. For all of 2020, only 42 days were like that. Hence, this volatile crypto wave is already bigger than last year.
While the digital token’s price surged 20% above $39,000 on Monday, it is expecting even more wild trading ahead due to heightened regulatory pressure and its technical picture, strategists said.
These recent fluctuations come amid the elevated regulatory scrutiny in the U.S. as well as abroad. U.S Federal Reserve will soon release a paper describing its own research into central bank digital currencies. Meanwhile, Chinese authorities have warned the country’s financial institutions against the use of digital currencies for payment. It has also vowed to crack down on crypto mining and trading as it is in the process of releasing its state-backed digital currency, the digital yuan.
Furthermore, Elon Musk, who has been very vocal about cryptocurrencies in the past and was seen as their supporter, did sort of a 180 on bitcoin when the business magnate announced that the electric car-maker Tesla had suspended the decision to purchasing of its cars through bitcoin. He cited environmental concerns over the so-called computational mining process. However, he later tweeted that he had discussions with North American miners over the sustainability of the digital coin. This resulted in a temporary surge in the price of bitcoin.
Since bitcoin is a purely speculative asset, its value tends to shift tremendously making it one the riskiest as well as rewarding assets in the financial space.
Data from Cornerstone Macro shows Bitcoin’s intraday decline of 31.1% was the fourth worst for the cryptocurrency. JPMorgan analysts believe the worst of the correction is yet to come based on bitcoin futures positions. Following bitcoin’s failure to break above $60,000, momentum traders have curtailed their bitcoin futures bets, according to the Wall Street firm.
However, despite the asset’s extremely volatile nature, Bitcoin is continuing to gain momentum in terms of both price and popularity. And while the bitcoin bears may currently be in full- force, the crypto-mania continues regardless. And there are several reasons why.
The number of institutional and retail investors investing in bitcoin and other digital assets has grown dramatically in 2021. During the first quarter of this year, the largest cryptocurrency exchange in the world, Coinbase, reported $335 billion in trading volume, with approximately $120 billion in retail trading and $215 billion in institutional trading.
Bitcoin has a 21 million coin limit out of which, about 18.6 million coins have already been mined. Therefore, Bitcoin remains valuable because it is scarce in nature. It is widely regarded as an effective hedge against inflation, particularly as inflation claims rise.
The highly volatile nature of this digital asset has also contributed to its growing popularity and value. In addition, the availability of various trading platforms has helped to support smaller investors. Using advanced technologies such as Artificial Intelligence (AI) and Machine Learning (ML) along with powerful algorithms, trading platforms, such as bigmoneyrush, are helping especially novice investors in making informed trading decisions. The auto-trading feature also allows you to capitalize on short-term crypto booms.
This means that a number of public companies are turning to cryptocurrency for their cash treasuries, especially bitcoin. MicroStrategy, the business analytics firm, has been a major supporter of bitcoin and recently made an additional $10 million investment in the digital asset. Tesla was also initially among the frontrunner but its current stance remains unclear to the wider public.
The oldest bank in America, BNY Mellon, and PayPal, MasterCard, and Square are also adopting this cryptocurrency. Venmo and Visa are closely following the crypto trend as well. An upsurge of interest in bitcoin has been fuelled by institutional investments, reinvigorating lost confidence in crypto.
Although Bitcoin is still very much a volatile asset, involving a great deal of risk, it can be just as lucrative. Hence, many investors are still flocking towards the cryptocurrency in hopes of becoming early millionaires.