It’s no secret that Bitcoin, the world’s largest and oldest cryptocurrency, had its fair share of struggles throughout time. It went from being among the hottest assets to experiencing a disappointing downfall, and market turbulence took its toll on its value. Nevertheless, today, it is remaking its way into the ranks of advantageous tools for portfolio diversification among investors with long-term perspectives.
Getting started on cryptocurrency amid the bear market and without knowing where the Bitcoin price is heading might seem like a tricky and unreasonable move, but it makes sense for those keeping an eagle eye on them. Bitcoin is still gaining ground on its rivals, and it will stay that way as more and more critical players in the financial system look to experiment with it.
Among the main factors impacting cryptocurrency prices is investor sentiment. Indeed, 2022 was nothing to rejoice about regarding digital currency. Prices hit the deck after several unfavourable events in November, and investors rushed to sell their assets to protect their portfolios from losses. However, 2023 started off on a more positive note, with cryptocurrency prices recovering slowly from the wreckage and fostering hope among crypto enthusiasts.
Like any other investment option, several essential factors must be considered before putting your money into an asset, so let’s discover the aspects of Bitcoin worthy of your attention so you can make informed decisions.
The factors impacting Bitcoin’s price
Monetary policies, inflation or deflation, and economic measurements impact the value of bank-issued and government-backed currencies. For instance, a stock’s price typically falls when interest rates rise. When it comes to digital currencies that are independent of any financial institution, this is not the case anymore. Before you jump on any trend and get caught up in the hype, it’s essential to understand what drives the value of the asset you choose to invest in, whether it’s stocks, EFTs, cryptocurrency, or any other option.
Bitcoin was in the spotlight for retail and institutional investors, grabbing their attention and making its way into their portfolios or payment options. For instance, you can use this well-implemented cryptocurrency to pay for a wide range of services or products. Similarly, if you manage a business, you can adopt it as a payment strategy and accept it in exchange for your enterprise’s offerings. Throughout time, Bitcoin has grabbed the attention of major players in the financial market, fueling demand through increased media coverage, celebrities advertising for it, business owners touting its value, and investing experts imparting their knowledge.
Demand and supply are among the most important factors impacting an asset’s price. Bitcoin is designed with a cap to limit its supply, and regardless of its evolution, there can’t be more than 21 million coins in existence. This is nothing out of the norm in the crypto world; Binance Coin’s supply, for instance, is capped at 200 million. The developers behind cryptocurrencies with supply limitations intend to control and reduce the wild price swings already inherent to digital currencies. On the other hand, as the number of organisations embracing Bitcoin grows, it receives more market value, becoming a more appealing investment option for investors and boosting its price.
Last but not least, regulation plays another significant role in the evolution of Bitcoin’s value. Increasingly more countries pave the way to cryptocurrency regulation by creating new laws, aiming to create a safer investment background for investors and counteract fraud. Some countries may have stricter rules than others or restrict Bitcoin’s use. On the other hand, other countries support cryptocurrency’s use and tax profits generated from this type of investment. Before adding Bitcoin to your portfolio, learn about the tax implications and research the state of the cryptocurrency market.
How will you store your Bitcoin
It’s safe to say that one of the main aspects an investor should figure out before getting hold of an asset is how they’ll keep it safe and sound. When it comes to digital assets, your choice depends on the number of coins and how much you value the convenience of your storage option.
If you’re looking to invest only a small amount in Bitcoin, going with the wallet provided by the crypto platform you’re using can be the most convenient option. These are called custodial wallets and allow you to log in to your account and use your cryptocurrency as you wish, taking custody of private keys for you. However, hardware wallets are a safer bet for larger amounts invested in cryptocurrency because they keep your cryptocurrency offline. This way, you don’t have to worry about malware breaking into your wallet. It can take the form of a small plug-in device that looks like a USB or a piece of paper or metal with keys recorded on it.
When pondering between different ways to protect your cryptocurrency, it’s important to acknowledge the advantages and drawbacks each brings, as each comes with different functionalities and conveniences.
What’s lying ahead for Bitcoin
Bitcoin was down for a wild ride, and swings don’t stop here. The crypto market is cyclical in nature, and seasoned investors know there’s always light at the end of the tunnel, having experienced other bear markets besides this one. So far, they’ve struggled to fight through a wave of depreciating prices, but starting with 2023, several signs indicate a brighter future for the cryptocurrency sphere.
Bear markets are not out of the norm for any investment. However, when it comes to digital currencies, the bearish period tends to last longer because they’re still in their infancy and have yet to mature. Compared to other well-established and long-standing assets like stocks, these have just seen the light of day. As financial institutions open their arms towards them, their adoption speeds up, and they become more sought-after.
Adding Bitcoin to your portfolio during these cold times means taking advantage of its discounted price and looking at it through long-term glasses. Will you fight through the cold, hoping to reap the benefits when the storm is over, or are you sticking with other types of assets?