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The following guest post is courtesy of AMarkets, a St. Vicent & the Grenadines (FSA) regulated global forex broker established in 2007.
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Cryptocurrencies in general and Bitcoin, in particular, assumed commonplace with the trader. Media headlines hasten to report on the latest price record – they are ready to buy 1 Bitcoin for more and more of the usual dollars. Many cryptocurrency traders have long been trying to find the turning point of the sale of Bitcoin. However, what we are trying to figure out is: Is it still wise to sell or buy Bitcoin?
Let us briefly talk about what Bitcoin is and the reason for the significant rate consolidation. Bitcoin is the first of the cryptocurrency which currently has the highest capitalisation. In simple words, if you have Bitcoins in your Bitcoin-wallet, you can use them to purchase various goods and services. However, things get interesting from the view of investment and speculative profit from the changes in rate. Surely if we compared the financial assets from around the world, it would turn out that Bitcoin is far ahead in terms of volatility – the cryptocurrency prices change more at similar time intervals, and for that, there are several reasons.
- The initial growth of Bitcoin was supported only by the enthusiasts who believed that it could change the world. In part, it was due to the increase in the number of private investors who found this sphere attractive for investment.
- The Bitcoin technology itself promotes its growth. For example, the number of coins in circulation constantly decreases, while the mining complexity increases at times. As you can you imagine if the Gold reserves markedly decreased and became harder to find with each day, of course, as far as the speculators are involved, panic and a massive buyout of assets owned would ensue. Real threats do not exist with Bitcoin, however; many buy simply because the asset grows rapidly and one can profit from that.
- Additionally, the word about cryptocurrency is slowly getting around, and this means that at each juncture in time, there will be those who just recently found out about the instrument and those who have invested money.
- Many are drawn by the fact that cryptocurrencies are not regulated by state governments or central banks, and this means that your account will never be frozen or subjected to additional taxes as it tends to happen in crises. The payment method is completely anonymous yet very reliable. Information about the sender and the recipient albeit invisible, the wallet number is unhidden and the transaction itself will be stored in a specific block which is accessible on many computer systems. You cannot hide information about the transaction itself.
- Bitcoin support happens to have favourable news for backing. In the spring, Japan announced that henceforth, this cryptocurrency will be a recognised means of payment. This statement provoked a wave of rumours that other countries would follow suit. Currently, there is active talk about recognition from Australia. These measures left many pessimists high and dry who claimed that Bitcoin was illegal and would soon cease to exist.
Despite the wealth of well-meaning information on the crypto-sphere, the excitement surrounding it is very similar to the so-called “financial bubble”. The main sign of this phenomenon is the endless faith in the growth of a financial asset and a clear overestimation of the calibre of the consumers.
This happened in the late 90’s when the dot-com crisis occurred, during which young Internet companies, in which many saw tremendous potential and market capitalization (value of all the shares on the stock-market), many times exceeded the actual size of the company’s assets; Consequently, there was a collapse of quotes and liquidation of some companies. But no one doubted the true benefit of internet-startups, hence in the same vein, there is no doubt regarding the benefits of Bitcoin and its technological basis for the whole world. The only question is, what is its reasonable value, after all, it isn’t 4500 dollars as it is now on the stock market, is it?
At the moment, everyone is discussing the recent division of the main Bitcoin protocol into two branches. There are now two cryptocurrencies instead of one. The new payment instrument was named Bitcoin Cash and was warmly received by the members of the sector. The largest in the stock-market who deal in cryptocurrency immediately added it to their lists and the price has already doubled several times. This is not the first of such cases. Earlier, Ether (a cryptocurrency) also split into two without any negative effects. Looking at these events, Bitcoin revamped the epoch-making highs and almost overshot the 4500 mark, after which it corrected a little. Now the BTCUSD is under lateral consolidation conditions between 3950 and 4100. If you go beyond the tunnel borders, it is worth opening a deal as there will be an excellent entry point with minimal risk. A similar recommendation is offered by the analysts from AMarkets.
To answer the main question of this article, it is not too late to buy Bitcoin, but you have to do it with caution, using a stop loss at one of the important levels as there may be a long-term decline which may be caused by unexpected news due to overbought, or technical reasons, as it was several years ago.