Will the rise in cryptocurrency prices last?
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2020 along with so far in 2021, have been a dream season for crypto-investors. At the beginning of 2020 the price of Bitcoin hovered around $9,000 and, in 2021, it has reached over $60,000. And the question is whether this trend will be permanent or is it a speculative bubble that could eventually burst.
A large number of investors have profited handsomely from this bullish “rally” in cryptocurrencies. However, the effects of the high volatility of these cryptocurrencies over time are different for each type of investor.
For short-term investors, this escalation in prices is an ephemeral dream that, in a short time, will have to end because no trend is constant towards infinity in a permanent way.
However, there is a growing community of investors who see cryptocurrencies as the future of financial transactions. In English, this is known as the “HODLR” community. For them, the current rise in the price of cryptocurrencies is just one more episode that makes many of them endorse their confidence in these instruments.
In the long term, hodlers are betting not only on the increase in value of digital currencies but, for the reasons they believe this will happen such as, decentralization, limited issuance of assets, low transactional fees (existing because of BTC mining, which necessarily involves costs) and, of course, confidence in blockchain technology.
How do cryptocurrencies work?
In October 2008, an individual or group of individuals who would later be known as "Satoshi Nakamoto" released the "Bitcoin" white paper”. His claim is that it will become the world's digital currency, distrusting the FIAT money backed by governments and the International Financial System (IFS).
In general, both speculators and holders agree that episodes of high volatility in cryptocurrencies will be a constant in the short term.
Many investors believe that there may be a period of adjustment, relatively normal considering Bitcoin’s price history. Mainly followed by a period of moderate but steady growth, also with its microcycles.
Another argument supporting their faith in the permanence and growth in the value of cryptocurrencies is that, in recent years, there has been an increase in the number of people entering the crypto ecosystem for various reasons. From the independence it offers from the traditional financial system, the fear of inflation and even, more and more users are including cryptocurrencies as a store of value.
Is bitcoin a store of value like gold?
Bitcoin’s superiority as a long-term investment asset.
2017-2018 was a year in which there were warnings of the possibility of a bubble around cryptocurrencies and, although indeed the period of adjustment was sharp, the prices of the main cryptos did not fall to the extent of disappearing. On the contrary, they have held up and in their respective adjustments have shown resilience by falling well above their previous lows and growing moderately and gradually.
This fact has given confidence and optimism to both ordinary people, who have decided to start investing in cryptocurrencies, and experts in the financial field who have even been changing their stance on Bitcoin. For several reasons such as:
- Popular acceptance. Although governments do not accept it as such, people have adopted them as financial assets and are already governed under the rules of the dynamics of financial markets.
- Reserve of value. In recent years, people have adopted Bitcoin as a store of value, among other reasons, because it is more accessible than gold or currencies, in addition to demonstrating strength by not disappearing after its adjustment periods.
- Bitcoin is an asset that is available at the click of a button, just by opening a 100% digital account in an exchange, which makes it more accessible than any traditional financial instrument.
- Self-manageable. The intervention of an “advisor” is not needed to make your own decisions about the purchase or sale of
- Unlike investing in stocks, indexes or commodities such as gold or oil, where you must necessarily buy a full title at the price indicated by the market, Bitcoin is divided into fractions called “Satoshis”, in honor of its creator, so it is not necessary to buy a full BTC to invest in it.
- Increased adoption. Every day the list of large companies and entrepreneurs that promote investment in BTC, or the acceptance of payments and the ease of transacting with this cryptocurrency increases.
Bitcoin is now on everyone’s lips and in the portfolios of many. All kinds of people, from expert analysts to millennials inexperienced in finance have turned to BTC for the promise of a future with high value and, with a view to that future coming in a matter of years, today they have dared to invest in it.
What are the risks of investing in cryptocurrencies?
Since the launch of Bitcoin in 2009, and the gradual emergence of other cryptocurrencies, these have been gaining popularity among the common people and among traditional financial institutions, as well as among large and small investors seeking alternative returns for their capital.
Cryptocurrencies: benefits and risks of virtual currencies
2017 has been the year of cryptocurrencies: More than 300 new virtual currencies have been created. Bringing their total to over 900. In other words, the number of virtual currencies in the world more than triples the number of conventional, state-issued currencies, which according to the UN currently stand at 180.