Bitcoin prices surpassed $62,000 for the first time, setting a new high. The optimistic crypto-asset investors were convinced by this meteoric rise that the future of digital assets is bright. After hitting an all-time high in December 2020, the world’s most famous cryptocurrency has had a relatively quiet era. But, with its notorious unpredictability, it has regained its former form, holding investors on their toes.
The explanation for the asset’s price rise even through a global recession has been attributed to institutional investors’ widespread adoption of cryptocurrencies. Analysts now have a clear understanding of how the blockchain technology that underpins cryptocurrencies works, thanks to increased knowledge.
The rise above $60,000 has also shown that Bitcoin can reach the $10,000 mark in less than a month. Bitqh is the place to go for all the latest news. The announcement by Coinbase that it would go public was the immediate cause for such a rapid rise in prices.
Coinbase’s market capitalization is projected to be between $70 and $100 billion, depending on how the valuation is measured. If the figures are right, Coinbase will surpass Facebook as the largest initial public offering (IPO) for an US company, a position it has held since 2012. Crypto investors are ecstatic about the company’s stock market launch, as it will be a watershed moment for the crypto industry, which has been dogged by Wall Street and regulators for years.
Coinbase, founded in 2012, is the largest cryptocurrency trading site in the United States. The business has reaped massive profits thanks to the continuous rise in the price of Bitcoin. The company’s projected sales of $1.8 billion in the first quarter of 2021 drew a lot of attention. This was a nine-fold improvement over the previous year’s figure for the same time. A profit of $730-$800 million piqued the interest of other investors, prompting them to investigate the Crypto market.
Although this turning point may not be enough to fully erase the mistrust that has existed in the minds of many for years, a company of that scale going public will make a lot of people understand that bitcoin is more than just an asset class; it is also a business that must be taken seriously.
What could be next in store for Bitcoin?
This year, the dynamics of Bitcoin have taken some fortuitous turns, making headlines almost every day. With the growing popularity of cryptocurrencies, people have learned to be extra careful, taking them offline and moving them safely to their personal wallets, resulting in an ever-increasing demand flooding the market.
Demands that are higher only mean that income will be higher. Bearing in mind bitcoin’s notoriously volatile existence, investors can anticipate higher highs and lower lows during the year.
Along with some short-term profit-taking, which investors love when Bitcoin or its peers set new highs, there is a strong long-term trend of steadily growing prices anticipated. People searching for alternative investment opportunities are finally assisting in the stabilization of cryptocurrencies.
Bitcoin’s value could skyrocket because of Coinbase’s IPO. The excitement of bitcoin reaching a new milestone is keeping both mainstream market investors and crypto market enthusiasts glued to the excitement of the company’s upcoming public debut. The former will take advantage of a direct investment opportunity in the stock of a business that is critical to the smooth operation of Bitcoin and the crypto space. And the latter gains the courage to venture outside the safe havens of traditional investments and accept bitcoins and other digital assets.
What drives the Price of Bitcoin?
The price of Bitcoin is influenced by supply and demand, as is customary in the world of asset popularity. Bitcoin’s supply is constrained, allowing only 21 million to circulate in the sector. Other variables, such as retail demand, institutional demand, payment acceptance, and risk appetite, also play a role.
The fear of losing out is what drives retail demand for Bitcoin. Small-time buyers pile into the asset after a market spike because they don’t want to lose out on the potential additional returns. They want to take advantage of any opportunity that the unpredictable cryptocurrency presents.
An investor’s willingness to take risks encourages him to act rashly without fear of repercussions, which fuels demand for Bitcoin. Bitcoin is ten times more volatile than the USD-EUR or USD-YEN exchange rates. Investors, on the other hand, are unconcerned about this because they can afford to lose more money.
Finally, as more private companies and financial institutions choose Bitcoin as a payment tool, it has a major effect on Bitcoin prices. Consider the latest announcements by PayPal and MasterCard that they plan to transact in cryptocurrencies, which caused prices to skyrocket. Their enforcement has helped to legitimize it as a means of trade, allowing people to become more familiar with the crypto world. Tesla, MicroStrategy, and Square have recently made notable institutional investments in cryptocurrency, prompting larger companies to consider cryptocurrency as a portfolio diversifier.
Today, all four conditions are working in concert to boost the price of Bitcoin.
People are still trying to stick to Bitcoin as a shield against inflation because of the global pandemic, which has sparked a significant economic crisis. Since Bitcoin has proven to be a strong store of value, institutional investors have redirected their cash reserves into it.
The halving of Bitcoin, which took place in May 2020, also contributed significantly to the surge in demand. Every four years, the halving occurs, halving the rewards offered to Bitcoin miners in half. This was the third halving, reducing the volume from 12.5 to 6.25 BTC, allowing Bitcoin to reach new highs in December 2020 after three years of stagnation.
How to avoid Crypto FOMO?
The market capitalization of the Bitcoin currency has surpassed $1 trillion. The figure is sufficient to convince people to join the bandwagon. However, if you’re not careful, you could get carried away and end up investing too much in the asset. This will expose you to risks for which you are unprepared.
The best way to keep a balance is to learn to diversify. Even if you expect big returns, it is never a good idea to put all your money in one spot. For example, if you had put your money in the S& P 500 at the time of the crash in March of last year, you might have lost 34%.
A diversified portfolio spread across a range of non-correlated asset classes is what keeps investors afloat. This makes it easier to weather asset price fluctuations. Consider precious metals, real estate and real estate investment trusts (REITs), government and corporate bonds, money market funds, and certificate of deposits for an overview of non-correlated properties (CDs), annuities, cash, and cryptocurrencies.
The amount of money you want to put into each asset class is determined by your risk tolerance. A good idea would be to set aside a small amount of money for each of them. Depending on the situation, you should rebalance your portfolio on a regular basis. Let’s say the price of Bitcoin reaches a new peak, and it now accounts for 20% of the overall value of your portfolio, even though your initial investment was just 5%. In this case, you might consider selling some of your holdings to take advantage of the profit and reinvesting the profits in your portfolio’s other asset groups.
FOMO has had and will continue to have a major effect on Bitcoin prices in recent months. As a result, the token will be able to demonstrate its value as a valuable diversifier as demand continues to rise. The ability of Bitcoin to protect against inflation and stock market risk fluctuations also appeals to retail and institutional investors.
Don’t get carried away because you’re afraid of missing out on this window of opportunity. Bitcoin is still a long way from being a mainstream payment process, leaving it vulnerable to market risks. If you don’t know when to exit the market because of price volatility, you might lose a lot of money. Practicing asset allocation policy and rebalancing the portfolio as circumstances change is a wise way to cope. This way, you will reap potential benefits while avoiding unnecessary risks.
Bitcoin has a good chance of becoming a popular mode of exchange because this innovative technology aims to eliminate fraud and introduce economic transparency. Tax authorities all over the world are willing to reconsider this potential investment option.
The year 2021 is shaping up to be a watershed moment for people’s acceptance.