The cryptocurrency market abounds in assumptions, suppositions, speculations, or even “expert opinions”, whether your interest resides in finding the optimal or inopportune moments to venture into this realm or the most lucrative ventures against the least prosperous ones.
However, when it’s all said and done, the elementary detail boils down to how the value of the assets evolves, which is why you find that the majority of the debated topics revolve around the subject of what is the price of Bitcoin. Once this mystery is taken out of the equation, aspiring investors determine whether they should buy Bitcoin with bank transfer or other methods, should they be thrilled by the asset’s price.
Indubitably, other implications with the potential to impact the price trajectory of the leading cryptocurrency are also constantly debated and bear a lot of importance when deciding whether a similar undertaking is a right fit for you. Furthermore, you need to assess further implications that can impact the value of the eyed assets and the whole cryptosystem.
As a rule, when the price of Bitcoin dips, it exerts a pull on the importance of other assets in the crypto realm, leading to a downward spiral. Similarly, when it witnesses an upswing, it brings the values of other assets up as well.
Bitcoin has been on a rollercoaster ever since its inception and is prone to price modifications resulting from internal and external factors, whether stubborn inflation rates or undergoing system upgrades. Despite the shiny spot where it found itself at the beginning of the year, its luster has been fading lately, with several factors shouldering the blame for this decline.
Liquidity
Regardless of the investment you are eyeing, the ease with which you can convert your holdings into cash is the ultimate factor in deciding whether or how much you’ll pour into that asset. You likely don’t want to buy into an asset you’ll remain stuck with for longer than needed simply because it’s difficult or too expensive to cash out.
Liquidity is essential in a healthy crypto market, as it ensures that positions can be entered or exited with the most minor slippage possible. Given these circumstances, the BTC market reigns supreme regarding liquidity, boasting trading volumes that soar over tenfold over those of its competitors.
However, when analyzing the bigger picture, it’s impossible not to point out that the market is currently dealing with challenges regarding Bitcoin, which only adds to the market’s already low liquidity state. This fact may translate to sped-up price fluctuations and trigger liquidations in OTC or exchange-traded derivatives.
U.S. lawmakers closely monitor Bitcoin and the whole cryptocurrency industry to address problematic law and financial aspects. A strengthened and comprehensive regulatory framework can ultimately mean more safety for the regular crypto owner, increased trust in the industry, and less room for malicious acts like fraud.
Long postponement of spot Bitcoin ETFs
HODLing, the slang for long-term investment approaches, has reached an all-time high as the more significant portion of crypto owners stick with their assets and refuse to sell them until the Federal Reserve takes a decision regarding the long-discussed spot Bitcoin ETFs. For the better part of the community, the overall outlook is optimistic, and approval is more than likely. The long postponement of a ruling has marked the newspapers’ front pages for a while now, with numerous companies filling for these projects.
So far, many names have raced to develop exchange-traded funds that permit interest parties to invest in the assets on traditional exchanges and expose them to the coins’ abrupt price fluctuations. Ideally, they would facilitate investors’ entry into the crypto market and ease their Bitcoin purchasing and selling process, which only takes a brokerage account.
One reason cited by the SEC to justify the long postponement of the undertaking is related to the crypto’s inherent volatility. However, a conclusion is expected to be reached by the beginning of next year, and it will likely be favorable for the crypto community. Applicants must also demonstrate how they can safeguard investors from the potential risks underlying the market.
Macroeconomic factors
Bitcoin has kicked off the year positively despite the challenges witnessed in the market last year. The consequent collapses of reputed banks and crypto exchanges, growing inflation rates, political conflicts, troubling Chinese real estate market, as well as the harsh Indian tax regime have all had their say in how the prices of crypto have evolved over the last period.
Furthermore, current detrimental factors such as prices for gasoline that surged by 3.7% and the overall rise for essential expenditures are not to be left aside when analyzing the elements that played out Bitcoin.
The aftermaths of the Russia-Ukraine war, growing concerns over inflation rates in developed countries, and the unstable U.S. banking system also contribute to the wild fluctuations. For this reason, experts recommend dedicating at most 5%-10% of your investment portfolio to cryptocurrency and spreading your money over a broader category of assets. Furthermore, remember that crypto is better approached through long-term perspectives.
Inflation
Inflation and interest rates are inherently bounded. The rising interest rates and the fact that the Fed has recently announced they won’t lower in the foreseeable future have imminently taken a toll on the whole crypto industry. The current high interest rates will likely weigh heavily on investors’ future approaches to Bitcoin and contribute to increased volatility in an already erratic market, letting investors carefully assess their investment strategies.
The impact doesn’t only apply to the crypto industry. Commodities, stocks, bonds, and other investments are also subject to devaluation. The last eighteen months saw interest rates deeply influence the price trajectory of these assets, with Bitcoin leading the trend, and the scenario will likely persist for an undetermined period. Nevertheless, long-term holding is always a reliable method to navigate the wild waters in which the industry swims.
Conclusion
Bitcoin has consistently been subject to price fluctuations, influenced by both internal and external factors. Nonetheless, it remains paramount to regard its price as the initial indicator when contemplating entry into cryptocurrency investments, as it establishes the prevailing sentiment and sets the stage for the behavior of other assets.
Despite all the turbulences, experts, analysts, and the majority of the crypto community are optimistic about where the assets are heading since bull markets always tend to come around after depressing times.