It was a typical Saturday. Suddenly, the fire alarm went on at 6 AM. I went outside in order to protect myself from the possibility of fire. The first thing that I did, when I unlocked my phone, checked the Robinhood app. Bitcoin’s price had dropped more than 17% while I was asleep. A loss was around $8,000. On November 9, Bitcoin reached its all-time high, approximately $69,000. JPMorgan has predicted Bitcoin to reach $146,000 in the long term just a month ago. Will these predictions have a place? What caused this massive drop? Liquidation of nearly $1.3 billion, the first massive liquidation. El Salvador, where Bitcoin is a currency, has bought a dip. Buying a dip is a strategy when buyers buy a stock or a cryptocurrency when it drops. Consequently, they believe that in the long-term, the price will eventually rise. In my opinion, Bitcoin and other major cryptocurrencies are just a big bubble, which will end one day. It will be the next recession of the world’s economy. However, no one knows if there is a bubble until it pops.
7 comments:
I agree with your sentiment about Bitcoin being in a big bubble. The value of Bitcoin is too volatile to stay afloat. According to a Forbes article, El Salvador recently "decreed Bitcoin legal tender" which means it will be accepted as payment for debt. This could be extremely dangerous for banks in El Salvador. The article says that Bitcoin will enable much easier and safer remittances from Salvadorans working outside the country. Maybe this ends up being a smart move for El Salvador, but it seems like this is more dangerous than beneficial.
https://www.forbes.com/sites/johntamny/2021/06/20/bitcoin-wont-replace-the-dollar-because-its-creators-dont-know-whats-wrong-with-the-dollar/?sh=66250d257b37
I agree with you that Bitcoin and other major cryptocurrencies are just a big bubble. It is very risky that El Salvador will now accept Bitcoin for payment due to its volatility. Bitcoin has decreased roughly 25% in the past month, despite high price targets. Bitcoin has one of the largest market caps in the world and has grown over 6,318.82% in the past 5 years without having the fundamentals to support the growth. Michael Burry the "Big-short" investor agrees that the crash is coming and when it does people will lose big.
https://markets.businessinsider.com/news/currencies/big-short-michael-burry-warns-meme-stocks-crypto-crash-coming-2021-6
*previous comment*
There are a lot of people "betting" on Bitcoin in the future. I feel that people are currently buying crypto prematurely. It is supposed to be a currency, but right now it isn't being traded as one. For something like Bitcoin to truly take root, large governments must start moving their way. It can't be countries like El Salvador. It must be countries such as the United State and China. However, I think it is very unlikely that large countries will move towards crypto-currencies.
I am a big believer in the potential of cryptocurrency. Yes it is unreliable but we can say that about the USD as well. The thing most attractive about cryptocurrency is that it is a decentralized currency unlike the USD which is centralized by the government. In my opinion this gives crypto no cap on its potential. Usually when a cryptocurrency goes down that means the asset of that cryptocurrency goes up. For example ETH tanked about a week ago, this made NFT's sky rocket and pumped the NFT market. We should get scared over a cryptocurrency dropping they are long term investments, they are also seesaws meaning that if they drop their asset will rocket.
It seems that bitcoin is very unstable and while this huge drop in price may come as surprise, and expectedly so, it will probably come back in price very soon. Maybe Bitcoin should be regulated as normal currency is more stable and only drops or increases with inflation, if Bitcoin becomes more regulated these huge drops/ increase will not happen as much.
It is interesting that this is happening, especially now that countries are considering Bitcoin as a more useable currency in day to day transactions. There is even speculation of countries making Bitcoin their national currency. I am interested in seeing responses from an international level.
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