A whitepaper introducing Bitcoin, one of the most ground-breaking innovations ever made, was published in 2008. Since their inception, blockchain and consensus mechanisms have made smart contracts and peer-to-peer transactions possible, effectively launching the decentralized finance sector as a whole (DeFi).
Bitcoin has historically been among the most erratic financial instruments ever, and there is no indication that this will change any time soon. Many people wonder when the best moment is to actually buy Bitcoin as the price continues to change.
Is This The Right Moment To Buy Bitcoin
Given how unpredictable Bitcoin is, determining when to buy might be challenging. It is crucial to consider previous market cycles in order to assist us decide when the optimum time to buy would be.
Following the 2013 Bitcoin boom, the price of one bitcoin dropped from $1,200 to $200, representing an almost 85% decline in value. The surge in 2017 saw Bitcoin hit all-time highs, almost $20,000. The cost of Bitcoin decreased to roughly $3,200 over the ensuing years. Over 80% less value than the local peak was achieved as a result of this bear market.
Looking at the current Bitcoin cycle, which began in 2020, we can see that the price rose to all-time highs of $69,000 before eventually falling to about $29,000. Even though this cycle might still be in progress, historical price movement suggests that Bitcoin’s price may continue to decline.
The ideal strategy to buy Bitcoin in circumstances like these, where the price is highly volatile, would be to dollar-cost average. When using the dollar-cost-averaging investment technique, a person splits the total amount they wish to invest into smaller amounts and makes regular small purchases as opposed to a single large one.
For instance, after buying Bitcoin for $45,000, its price falls to $20,000. That investor has since lost more than 50%. The investor may have reduced their average buy-in price if they had used dollar-cost averaging to make smaller purchases when prices dropped.
As an alternative, after being purchased at $45,000, Bitcoin increases to $65,000. Although they would have been more safer, the investor would have lost out on a little amount of profits if they had dollar-cost averaged their price. This is a far more effective technique to buy Bitcoin, lowering the risk and increasing the profit.
What Determines Bitcoin’s Value
Network effects, which literally mean that the value is derived by the number of people trading Bitcoin, determine the value of Bitcoin. In more straightforward terms, supply and demand for bitcoins influence their price. Given that demand for Bitcoin is growing and supply is essentially steady, the price will rise. t. The first cryptocurrency ever made, Bitcoin, launched a whole sector of decentralized finance.
The value of Bitcoin is also affected by block rewards and the state of the market. The quantity of Bitcoin that is awarded to miners is cut in half every four years, thus changing the available supply and impacting the price.
How Come Bitcoin Is Moving
It is crucial to take into account the macro-psychology that drives these markets when analyzing how assets move. Decentralized finance and cryptocurrencies typically receive a lot of media attention when Bitcoin rallies. This focus is followed by a period known as “the development stage.”
This is where more developers are turning to creating smart contracts, and people are beginning to understand the significance and influence of blockchain technology every day. Eventually, the cycle will restart since new technology introduced during the development stage will attract additional users and media attention.
Looking at the 2020–2022 cycle, it appears that media coverage of cryptocurrencies and DeFi has peaked. As Bitcoin’s price has struggled to gain traction, market mood has also been deteriorating, suggesting that this could be the start of the development stage.
In 2022, will Bitcoin reach a new record high
Given its tremendous volatility, Bitcoin might very well reach a new record high in 2022; but, the price would need to experience significant buying pressure. The price of Bitcoin might surpass $70,000 if it develops another leg of its cycle. This need Bitcoin to overcome its significant resistance at $58,000. These are proven levels of resistance, thus breaking them would increase Bitcoin’s volatility.
How to Purchase Bitcoin
A handful of the various cryptocurrency exchanges available to traders include Coinbase Global Inc. (NASDAQ: COIN), Webull, eToro, Gemini, and Voyager. A controlled exchange is a fantastic place for people to begin purchasing cryptocurrencies. As they do offer various services for investors, be sure to look at what each exchange has to offer.
Will Bitcoin Continue to Fall
In the past, when the price of Bitcoin achieves a record high and reaches its peak, the price lowers quickly. Following this price decline, there is consolidation before the market enters the following bull run, which causes prices to become extremely volatile. It is likely that Bitcoin won’t become a stable asset anytime soon if these historical cycles in its price are allowed to continue.
As these are relatively volatile assets, keep in mind that this is not financial advise and that you should always conduct your own research.