The last few months have seen the Bitcoin investment value grow and go from strength to strength. Typically when this happens to any currency, stock or asset, investors begin to consider when the value of them will start to crash as this is something that is usually inevitable. While it is almost impossible to conclude how the Bitcoin market will fare in the coming weeks and months, we can look at the reasons as to what caused the spike in Bitcoin value and use that to assess the current situation Bitcoin investors are assessing themselves.
The story so far
A top performing currency in the late two years, Bitcoin has certainly had its fair share of bad luck in the past. However, despite crashing when China announced that it was going to clamp down on trading, start charging a fee on transitions and block withdrawals from trading accounts, the popularity of Bitcoin prevailed.
2017 was said to have been an exceptionally well performing year for Bitcoin. The cryptocurrency hit record highs on a number of occasions and reached $1325 before falling to $900 in March and then returning to an all-time high once more in April. This peak was then challenged once more on the first day of May this year as Japan made the cryptocurrency an official legal tender. This, alongside the fact that the Winklevoss twins applied for a Bitcoin ETF (Exchange Traded Fund) to the SEC to be reconsidered was accepted, really worked towards building investor confidence. The last month saw such a renewed interest in Bitcoin that it is now fast becoming one of the most intriguing and lucrative platforms for investors to explore.
Is a crash imminent?
In order to accurately address this question it is important to assess the current European economic situation. The fact that Emmanuel Macron, for example, has recently won the elections in France has assisted a boost in the economic stability in the EU. Events such as this help to reduce fear surrounding making investments in Bitcoin during a time of economic uncertainly on the whole, particularly following the decision for the UK to leave the European Union.
It appears that while speculation with regards to when the Bitcoin bubble will break is something that is a continued subject for discussion, knowing to what extent its value will drop by is still something that is very much undecided. A real turning point for many is rumoured to be what decision the SEC finally makes with regards to Bitcoin ETF reconsideration. One of the main reasons for denial of the Bitcoin ETF is the fact that the market was not regulated enough.
If you look at a Bitcoin investment chart you will see that there appears to be a double top pattern, where essentially two peaks are followed by a drop. Some people believe that this pattern offers a very clear insight into when traders will commit to buying or selling Bitcoin. While the current pattern has not yet dropped to a point that has mimicked an earlier drop, the chart does suggest that a sudden fall is fairly likely to occur.
This contradicts the opinions of some financial analysts who believe that while they think that the financial market on the whole will drop in value, it will not impact the value of Bitcoin. In fact, some analysts believe that investing in the cryptocurrency is one of the best forms of investment out there.
Bitcoin vs. gold
In March 2017 we were greeted with figures that illustrated the fact that one Bitcoin was in fact worth more than an ounce of gold. While an ounce of gold was worth $1233, the value of a Bitcoin stood at an impressive $1268. This has called into question whether Bitcoin could ever replace gold as a form of currency in the future, which may well become an important contributing factor into how investors respond to the cryptocurrency amidst the fears that its value could dwindle. While some believe that the Bitcoin market is purely speculative, others see a great deal of value and potential in it as a form of currency.
Why are people likely to continue investing in Bitcoin?
The scarcity of Bitcoin is still going to be one of the key factors of its appeal for new investors. In the same way as gold, Bitcoins need to mined which means that their numbers are limited and become more valuable over time. The inflation rate for Bitcoin is always on the rise, which suggests that while it may drop in value on occasion and be liable to value changes in response to economic movements, it will not stop being in demand.