Is Now the Time to Invest in Cryptocurrencies?

In recent times, the world’s most valued cryptocurrency, Bitcoin (BTC), has joined the entire market of virtual currencies in decline. It has dropped around 36% after setting an all-time peak of almost $69,000 on November 10th (since March 25th). As investors move away from riskier investments, Bitcoin’s value per token has risen slightly above $44,000.

With all the recent negativity surrounding the cryptocurrency, now might be the time to start buying the asset.

Difficulties in The Crypto Scene

The Federal Reserve has raised interest rates in response to rising inflation in recent months, with further hikes forecast for the rest of the year. While these events are an indication that the US economy is growing, investors are seeing them as the start of the end of a simple approach that is normally supportive of increased asset values. This entails a shift away from high-flying securities and cryptos in portfolios.

However, during the last few weeks, Bitcoin’s value has been rising steadily. Cryptocurrencies are well-known for their tremendous volatility. Nevertheless, if you examine the investment class’s short history, it has always been able to recover from downturns and achieve new highs. This, we believe, should be the scenario with Bitcoin in the end.

According to research, Bitcoin temporarily surpassed its $47,201 yearly break-even point in 2022, going as high as $47,524 prior to actually settling down in the $46,850 region by mid-afternoon Asian time.

As per the market data, the leading crypto by market cap has gained five percent within the last day. After increasing for six days in a row, Bitcoin has regained almost 12% from last Sunday.

Most big cryptos, including Ether (ETH), were also booming. On Sunday, the second-largest cryptocurrency by market capitalization followed Bitcoin’s lead and was trading upwards of $3,250, its highest point since early February. Cardano, Solana, and Avalanche coins, among others, were all trading in the green. Shiba Inu and Dogecoin, two popular meme cryptocurrencies, were up roughly three and six percent, respectively.

Adding Bitcoin to a Diversified Portfolio

In an efficiently diversified and long-term portfolio, it makes sense to have crypto ownership (no more than five percent). Bitcoin is the most well-known digital asset, having been introduced in 2009. As a result, it has a significant financial infrastructure backing it up and assisting in its mainstreaming.

Bitcoin may be purchased through numerous brokerages, including Binance, Coinbase, and Robinhood. These businesses are attempting to remove the barriers to entry into the Bitcoin sector.

There are two main reasons why the value of Bitcoin should rise over time. The most prevalent bull argument is that Bitcoin may eventually become the online version of gold as a reliable store of value. Bitcoin’s overall market value (as of March 25th) was $843 billion, so it would have to climb nearly 1,100 percent to match the valuation of all gold on the planet, which is now worth $10 trillion.

Bitcoin possesses the potential for real-world applications, especially in developing countries. Cash transfers, for example, have high fees and long processing delays. Bitcoin is an obvious choice for consumers who want to transfer funds back to their native nations at low prices and with immediate settlement. A circumstance like this would result in increased demand for Bitcoin, which would lead to price gain.

It’s also crucial to comprehend the most fundamental bear reasoning for Bitcoin (and cryptos in general), which is related to regulation. China made it unlawful to use or mine cryptocurrency last year, and there is concern that other large economies will follow suit. The Biden administration in the United States recently signed an executive order directing several government departments to investigate the opportunities and risks of virtual currencies. This is a good thing. As a result, we do not believe the United States would outlaw cryptocurrencies, as it wishes to remain a world leader in emerging technologies.

The Bottom Line

 

The current price of Bitcoin is still currently about a third lower than its price roughly five months ago. This makes it the perfect opportunity to buy. With so many positive developments and increased attention, Bitcoin could soon make the rebound that we were all certain would happen eventually. The entire crypto market seems to be strengthening, which could be beneficial to market leaders and alt-coins alike.

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Author: Jason Donaldson