Bitcoin is a cryptocurrency that has been around since 2009 and has become a popular investment. It has also been getting a lot of attention in the media recently. If you’re interested in buying Bitcoin, you might wonder if it’s a good investment, especially with its value drastically dropping.
This post will explain how bitcoin works and why it drops in value. You will also learn whether or not to buy some now.
How Does Bitcoin Work?
Bitcoin is a cryptocurrency that uses blockchain technology. The blockchain is essentially a public ledger of all transactions that have ever taken place on the network. It is decentralized, meaning no one person or group of people controls it. Instead, it is maintained by every computer on the network.
When you buy BTC, you are buying an access key to your copy of the blockchain—the way real estate agents give out keys to houses they are selling. The whole point of getting a key is so that when someone else wants to purchase property from you, they can use your key instead of theirs. You can also make changes to your copy of the blockchain if necessary. That is how bitcoin works.
Why has bitcoin dropped so much in value?
Bitcoin has dropped. It’s not the first time and won’t be the last.
The reason for this is that bitcoin is a volatile currency, which means that its value can change over time. In fact, it has been known to change its value by as much as 10% in just one day. That’s why it is a volatile currency—it can be pretty volatile.
But there are a few reasons why bitcoin might decline in value now, so let’s look at them.
First and foremost, there was an announcement that the SEC would investigate several cryptocurrency exchanges for fraud. While this doesn’t mean that all cryptocurrencies are fraudulent, it does mean that regulators are starting to pay attention to them—and they will probably start cracking down on certain practices they don’t like. That isn’t necessarily bad news for crypto investors. However, if you want to invest in crypto without getting noticed by regulators, your best bet may be to wait until the dust settles.
Secondly, China is cracking down on bitcoin exchanges. The People’s Bank of China (the central bank) issued new rules which require all exchanges operating within their borders to register with them. If they don’t comply with these regulations within 30 days, they’ll be closed down permanently. These and other reasons, like the ongoing war in Ukraine, are causing lots of mayhem in almost every market. They could be the top reasons why bitcoin is dropping.
Will Bitcoin Go Back Up?
Well, from the look of things, it is hard to say that Bitcoin will return to the heights we witnessed at the end of last year (2021). You need to understand that its price is based on speculation, which is why you can never predict bitcoin’s future. That means its price and performance depend on how the crypto world is feeling.
However, the digital asset may offer investors limelight of recovery if its previous performance is something to go by. In the year 2018, the coin went down by 83% but recovered to new all-top highs in 2020 and 2021. Its price shot up thanks to the guys who pooled their savings during the lockdown. Even though there are no guarantees that the price could hit the all-time high in November 2021, when it clocked $69,000, the price could still go up.
If you already have a bitcoin investment, you could hold on a bit longer to see what happens. For anyone who wants to buy BTC now, you should probably wait and see what happens first in the coming months.
Is BTC Still a Good Investment?
By now, you already know that bitcoin is quite volatile. Before investing your savings in bitcoin, there are a few things to consider. You need to understand what you are diving into fully and, of course, have a strategy. Also, ensure that the investment decision is from your view and passion, not just the fear of missing out. Here are critical questions to ask yourself before investing in bitcoin today.
- Am I okay with the risk levels in cryptocurrency?
- Do I know how the cryptocurrency market works?
- Is there evidence or suggestions from experts that the price will go up?
- Will there be an available market if I wish to sell my investment in the future?
- Why didn’t I buy it before when it was a bit cheaper if it is an excellent investment?
If you cannot answer these questions truthfully, it is wise to let the idea of investing in bitcoin slide. Investing in cryptocurrency is risky, meaning you only invest money you can afford to lose.
Can I Lose My Money in Bitcoin Investment?
Yes, you can lose your money. The crypto market is nothing like the conventional stock market. The value of bitcoin is based on speculation, while the stock market prices will move based on the company’s performance. There are various ways you can lose money in bitcoin, and they include:
- Value goes down, and you sell – selling at lower prices than you bought
- Your memory – some people forget entirely about their cryptocurrency investment
- Cybercrime – you can lose money through scammers and hackers who steal about $10 million daily
If history is something to go by, the price of bitcoin could go back up or stagnate for a while. Whether to buy BTC now or not entirely depends on you. Ask yourself the crucial questions, and if you can answer them correctly, then you can go for it. Just remember that digital asset is volatile and risky.