To make matters worse, Bitcoin is a very risky asset. Like most risky assets, it attracts traders who operate with leverage (enabling even higher gains, but taking much greater risks). This type of operation often has automatic sale mechanisms when the asset reaches a certain price (the so-called Stop Loss). This creates a ripple effect: prices, which were already falling sharply, begin to be further pressured downwards with a flurry of automatic sell orders.
Was it already for Bitcoin?
Unlikely. And the upward movements that followed the sharp drop corroborate this.
Cathie Wood, founder and CEO of Ark Investment Management (and as famous as Elon Musk in the world of disruptive technologies) said in an interview with Bloomberg TV that he still expects the cryptocurrency to hit a $500,000 price tag, despite being penalized by volatility at the time.
Thinking about valuation and assuming that Bitcoin will continue to exist and its applicability should increase as we know more about this universe, scarcity counts in favor of price (law of supply and demand). Yes, scarcity, given that there is a limit of 21 million Bitcoins that can be mined in total, a number that should be reached in 2140, according to expert forecasts.
How to deal?
Even those with a positive outlook on Bitcoin and cryptos in general can’t deny the obvious: volatility is unlikely to diminish anytime soon.
The moral of the story remains the same: can you invest? He can. But always be careful not to put too much money (by your own standards) into such an unpredictable asset. We recommend a maximum of 5% of the portfolio in crypto for the most aggressive profiles, but the most honest way to make this decision is to ask yourself the following question: “How much of my money can I stand to see disappear in a few hours?”
As a writer, Richard is an advocate of blockchain technology and cryptocurrency in general. He writes about all things from cryptography to economics, with a focus on how it applies to cryptocurrencies. He is also passionate about writing about topics such as decentralization, open-sourced software development, and copyright law.