Bitcoin has become quite a familiar phenomenon in the last decade. People who in some way or another follow the global news, are affiliated with banks or are social beings, must have heard of Bitcoin once in their life. Since its launch in 2012, Bitcoin has become the first digital asset to uplift cryptocurrency on a massive scale. However, this is undoubtedly one of the riskiest assets at present if you are thinking of investing in it.
What is Bitcoin?
Invented by a group of developers using the name Satoshi Nakamoto in 2008, Bitcoin was first released in a whitepaper just after that year’s financial crisis. Like all cryptocurrencies, Bitcoin is decentralised and is not regulated by any financial authority or central bank. In the year 2022, millions of people will have invested in Bitcoin. The first-ever recorded Bitcoin price was $0.003. Since then, Bitcoin has reached a price of$19,775.22 in September 2022.
Each Bitcoin is created (or mined) using an encrypted code, which is a string of numbers and letters. Each Bitcoin must be mined. The same equation used to create the code can “unlock” it (like a virtual key). However, only 21 million Bitcoins can be mined in total. Bitcoin is a form of payment that operates via blockchain technology to send data in cyberspace.
How is Bitcoin Doing?
In the history of its existence, Bitcoin has been the most popular crypto. But this is the Most Volatile asset in the world. Although Bitcoin is constantly shaking up the investment world, El Salvador is the first country to make Bitcoin legal tender (2021). It is the only country to use it as its treasury (President Nayib Bukele announced that he holds shares in Twitter). El Salvador holds 1,800 Bitcoins.
During the COVID time of 2020 to 2021, Bitcoin rose so high; in November 2021, the price of Bitcoin was $69,000. The price of Bitcoin and several other leading cryptocurrencies have been on a downward trajectory in 2022. According to Barrons.com, the price of Bitcoin dropped 1% over the past 24 hours to around $19,900, flirting with the recent low of $19,550 hit in the first week of September 2022.
The Causes of the Recent Downtrends in Bitcoin
1. UK and US interest rates are uncertain
2. Living costs are flying high and people do not have extra savings to invest in Bitcoin as their long-term investments
3. Possibly Russia is going to ban crypto trading and mining
4. China is enforcing legal restrictions on Cryptocurrency
5. Bitcoin, in particular, is not a popular investment for financial sharks.
Risks That Investing in Bitcoin 2022 Carries
Investing in Bitcoin in the current state of 2022 is very risky due to its downward movement. However, we can never predict this highly volatile asset accurately. Bitcoin is not like day trading in forex. This is a long-term investment if you want to profit from it. The risks associated with investing in Bitcoin,
1. Extremely volatile markets and big institutions and governments have not entered the market for long-term investment yet;
2. Investing in Bitcoin requires patience;
3. Risk is definite, so you must be ready to face the risks;
4. Bitcoin can wipe out your total investment.
Should You Invest in Bitcoin in 2022?
Rising inflation and interest rates have caused the cryptocurrency to fall along with stocks and shares as investors dial down the level of risk they are taking on. During the Ukraine war, Russia has stated that they are looking into cryptocurrencies to lower its dependence on the US dollar. Bitcoin has the potential to disrupt the US dollar massively, and it is simply too big to be ignored at this point.
1. For a long-term investment, you can invest, but right now, it is better to hold it for a certain period.
2. Just because it is a hyped concept, don’t let the FOMO take its toll on you.
3. Crypto markets are not like forex, indices, or stocks. You must have a thorough knowledge of what you are willing to invest in.
4. Don’t invest more than you can afford to lose.
5. This should never be the only investment.
6. Cross-check and assess the market for a good prediction.
Bitcoin has great potential to take over the paper currency market, but only if there are a good number of investors who are invested in the market. Although it is a great threat to the whole financial institution, but possibly we are looking at the near future when all the transition will be executed via floating currency and no government or financial institution will be responsible or have the authority to have control over people’s money.