Three weeks ago, Bitcoin climbed to over $12,000 only to crash in a matter of minutes for $1,500. Investors got chills from such a huge plunge in a short time, and many are now questioning whether or not Bitcoin is able to maintain its value, or if the crash is inevitable. While the coin was taking a dive, 72,000 people decided to quickly sell their Bitcoins which brought down market capitalization from $214 billion to $208 billion. This may not seem like a big deal to ordinary folks who have no investments in digital currency, but in the currency exchange market circles, this is all investors talk about. Bitcoin seems to be justifying the suspicions that followed it from the first day, and now many are in doubt whether to keep the coins or cut their losses and run.
This is a second hit for Bitcoin since the beginning of the pandemic back in March when it crashed to a value of a little over $4,000 for 1BTC. The currency is still standing and despite everything, is looking good with the little change for the past couple of weeks, but the traders are not so convinced. Many are questioning their decision to buy coins instead of gold which gained over 15% in value in the past few months.
Speculators are already rumoring that Bitcoin should be converted into more stable assets, with gold topping their choices. However, there have been some good predictions about Bitcoin circulating, like PayPal offering payments to its users in BTC, and Bloomberg suggesting that the coin could hit a $14,000 mark by the end of the year. Still, others seem to be scared of to further invest in an unstable currency and are looking for other sources and potential stakes.
In the last couple of years, investors have been at odds whether to keep Bitcoin or sell and invest in something else, namely gold. The price of gold spiked recently, mostly due to the banks stocking up on the assets, and being cautious since Federal Reserve started printing a lot of money to minimize the pandemic crisis. Will the gold manage to keep the trend of rising or is it just a temporary thing, only time will tell. In the meantime, speculators are buzzing about the weakened American dollar pointing out that it’s the best time to make gold reserves.
Major banks are suggesting that the market is about to crash which can pull down cryptocurrencies among other markets. One of the main reasons why Bitcoin is maintaining stability and value to some degree is the demand from Chinese investors through Tether. Tether is a US dollar-backed coin that was highly controversial since the creators claimed that every coin is backed by $1. In 2019 this all blew up and the Tether developers admitted that the coin actually was backed up by US dollar and loans. This “loan” part made it unstable and undesirable among investors. So, back to the Bitcoin. Currently, its value is closely dependent on the demand, if any, from the Chinese traders. If they decide at any point to move their investments into hedge funds, Bitcoin might lose the legs it’s standing on, and go down with the rest of the companies on the market.
Billionaires and some millionaires on the Wall St are wary of further investments until the markets are stable again. Many companies are struggling to remain liquid while the pandemic is still in effect. Big players on the New York stock exchange were not favoring Bitcoin even before the coronavirus crisis started saying that the currency that is backed by thin air is doomed. Today, investors are backing out of deals that they otherwise would not, and investing in cryptocurrencies right now is not even an issue. Truth be told, major investors are not thinking about investing in anything right now, but rather are just looking for ways to strengthen their hedge.
International Monetary Fund issued a statement saying that no one can predict with a decent amount of certainty how exactly pandemic is going to influence the markets. Uncertainty is not a friend to the investors and traders, and they tend to stay away from spending on fluctuating investments like Bitcoin. Pandemic completely disrupted trading, and no one can predict how it’s going to behave in the months to come. Because of this high net worth investors are laying low, trying to save their investments, and not making new ones. This could bring a market to a standstill and eventually crashing. When Federal Reserve started injecting more money into the economy to cover for all stimulus checks to boost consumerism and revive job markets, it sent the signal to banks and investment funds that the markets are in dire straits. This made investors put the hold on all investments and hold on to see new developments.
Influence of the stock markets
In the past year, every time Bitcoin came close to breaking an all-time high of $10,500 it suddenly dropped for a few thousand. This is a vicious cycle that keeps repeating itself. Even though Bitcoin is not backed by any asset, and is not controlled by any government, the stock markets do impact its value. Bitcoin is all about being not influenced by the movements of the traditional markets, but somehow it gets dragged under every time stock exchanges go under. So, we can determine that Bitcoin is not tied up to anything, but it is affected by the value swings of the stocks.
Will Bitcoin crash along with stock exchange? No one knows for sure. If you decide to invest in the current environment you should be more careful than usual. Stock exchanges around the world are struggling to keep moving, but the reality is that the major economies are on their knees. Maybe Bitcoin will survive one more crisis as it did before in the past, although many predict that it will be pulled down along with other stocks. In any case, do your research and get more information at https://infinitytrader.app/ before you make any moves that can cost you dearly.