As a newer asset class, Bitcoin is highly volatile, so it can be a source of opportunity for profit, but it can also lead to considerable losses and become a source of stress for investors. In recent years, its volatility has been slowly but surely decreasing, and this trend is one of the most critical elements of cryptocurrency adoption as a legitimate investment. Understanding Bitcoin’s price volatility isn’t a curiosity but a necessity, given that price movements can have profound implications, from affecting daily trades to leading to significant market imbalances.
Over the years, a fairly reliable pattern has emerged in Bitcoin’s price. Quadrennially, the network undergoes what is called a halving, which lowers the available amount of new supply. For every 210,000 blocks, the block reward for miners is reduced by 50%. In each instance, the price of Bitcoin reaches new record highs because the reduced rate of new creation causes scarcity, increasing demand and, consequently, the value. Bitcoin’s price is hardly predictable, yet it’s practical to view the chapters in its price history.
Bitcoin Climbed as High As $69,000 In November 2021
The swings on the BTC price chart reflect both investor enthusiasm and dissatisfaction with its promise, i.e., to revolutionize the financial industry. Satoshi Nakamoto, its anonymous creator, designed Bitcoin as an alternative currency and has no practical use other than being a medium of exchange. Bitcoin is now mainly regarded as a store of value, attracting people who bet on it against its price changes. In August 2021, the price of Bitcoin was $46,000, and by November 2021, it reached its all-time high of approximately $69,000. That specific hike was linked to the launch of a U.S. futures-based Bitcoin ETF, which attracted more than $1 billion in assets in the first couple of days.
The cryptocurrency market was noticeably different by the end of 2022, when Bitcoin’s price declined, dropping below $20,000. Inflation, to say nothing of the global energy crisis and Russia’s war of aggression, slowed down Bitcoin’s development and that of just about any other cryptocurrency. Commonly referred to as the crypto winter, the poorly performing cryptocurrency market is characterized by a lower trading volume, so it’s not just about lower values for digital assets. If you take a look at the numbers behind the crypto winter of 2022, you’ll no doubt understand the financial losses that have been incurred.
A Cryptocurrency Like Bitcoin Has a Finite Supply Of 21 Million Coins
Bitcoin has proven its critics wrong by demonstrating what it’s capable of. It’s here to stay. Nevertheless, Bitcoin isn’t going to be around forever because its supply is finite. Satoshi Nakamoto ensured that only 21 million coins would ever be in circulation to control inflation. It was an educated guess, so as to say, since the mysterious inventor of Bitcoin had to make the decision with no time to spare, having no idea what the future would bring. The hard cap is an essential feature of Bitcoin’s monetary policy – it’s encoded into its source code. Nearly 89% of the supply had been reached in April 2021.
It’s expected that Bitcoin will run out by 2040 when the last coin will be mined. Mining profitability is affected by the costs of equipment and electricity, not to mention its complexity and the market value of Bitcoin. It’s improbable Bitcoin will reach the 21 million limit because the network uses bit-shift operators to round down to the nearest whole integer. At any rate, when the network will cease producing new Bitcoins, miners will no longer receive block rewards and will depend on transaction fees for compensation. The blockchain will remain robust and keep on processing transactions.
Bitcoin Has Gained More Than 50% In 2024 Amid A Flow of Money into Spot ETFs
The price of the world’s largest cryptocurrency by market capitalization rose above $69,000 on March 5, 2024, driven by the influx of spot ETF money. U.S. financial industry leaders are actively buying hundreds of thousands of Bitcoins, allowing investment firms like Fidelity, Blackrock, and Grayscale to sell their products. Given that Bitcoin has less than two decades as a financial asset, which explains why forecasting its price trajectory is very difficult. For entities that trade Bitcoin in large amounts, the cryptocurrency’s appeal lies in its diversification potential; it has a low correlation with traditional financial markets.
Bitcoin’s halving event, scheduled to take place in April, can influence the digital asset’s value via investor behavior and market dynamics. To be more precise, the apprehension of the reduced new supply can engender speculative activities in the cryptocurrency markets, as seen in past events. Speculation is a positive benefit for market functioning, as it helps with price discovery – all information about supply, demand, and possible fluctuations becomes absorbed in the price. Halving events have been followed by price surges, and since Bitcoin continues to lead the pack of cryptocurrencies, it’s a critical watchpoint.
The Bull Run Is Underway, and Bitcoin Could Reach $100,000 By the End of The Year
Bitcoin could reach $100,000 by the end of 2024 if the upcoming halving event leads to a bull market and triggers a price rally in the broader cryptocurrency market. In other words, the Bitcoin halving could create a scarcity effect that jacks up demand and price. Until now, things have gone as expected. The SEC approved the first spot Bitcoin ETFs in the U.S. on January 10, 2024, after years of denial, further consolidating the primacy of Bitcoin as an asset class. Investors can now buy and sell shares on traditional stock exchanges, gaining exposure to Bitcoin’s value without actually securing it.
Investors have yet to make their way back to cryptocurrency, but all that can change if a bull run will replace the latest crypto winter. The launch of spot Bitcoin ETFs marks an important step in the mainstream acceptance of cryptocurrencies, providing a regulated option for both institutional and retail investors, potentially leading to increased liquidity. Movements from whales have already had an impact on the market, so the outlook on whether or not Bitcoin’s price will rise or fall is challenging to measure.
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