Learn Forex Trading Strategies, Is Bitcoin A Bubble? Read the Details To Note While Trading: Many people think, “I want to invest in Bitcoin, but I’m scared because it keeps rising and falling.” You may also see articles regarding Learn Forex Trading Strategies pointing out that the current Bitcoin market is a bubble.
This time, I will explain what the “bitcoin bubble” is and whether the rise in the price of Bitcoin can be said to be a bubble.
What is a Bitcoin bubble In Learn Forex Trading Strategies?
First of all, the bubble as an economic term means that the market such as real estate and stocks heats up and the price becomes far from the actual situation.
In other words, a “bitcoin bubble” means that the bitcoin market is heating up and its price is soaring.
There is a reason why the rise of the virtual currency market represented by Bitcoin is called a “bubble”.
This is because from December 2017 to 2018, the price of Bitcoin rose significantly to over 2 million INR per BTC and fluctuated significantly in the short term.
Bitcoin itself has no reality and is not backed by the legal tender currently issued. Nevertheless, the value of Bitcoin has risen steadily, eventually exceeding 2 million INR per BTC.
At that time, the prices of so-called “grass coins” other than Bitcoin also rose significantly, and it is said that many virtual currency investors called “billionaires” was born.
What is the past Bitcoin bubble?
2017 was also the year when virtual currencies such as Bitcoin began to spread widely in the world.
With the rise of the cryptocurrency market, major companies and investors have begun to participate in the cryptocurrency investment market.
Throughout 2017, legislation had begun to progress as of April. At this stage, the price per BTC was about 120,000 INR.
Next, in August, a new virtual currency called Bitcoin Cash was born due to a conflict between the Bitcoin developer and the side that approves transaction data.
At this timing, the price per BTC soared to 450,000 INR, raising concerns about the bursting of the bubble economy.
Finally, in December, CME of the US futures exchange started trading futures with Bitcoin, and with the entry of institutional investors into the market, funds flowed in and the price per bit grew to over 2 million INR.
Predict the future Bitcoin bubble
From the end of 2020 to 2021, the price of Bitcoin has risen sharply, whispering the possibility of a “bubble”.
However, on the other hand, there is a view that the Bitcoin price will rise further in the future.
There are two reasons for this
- Payment by virtual currency becomes widespread
- It is becoming an environment where it is easy to enter virtual currency
Payment by virtual currency becomes widespread
“Payment by virtual currency”, which is already becoming a reality in some areas, is becoming more and more popular in the future.
If virtual currencies can be used in the real world and the number of situations increases, further price increases are expected.
It is becoming an environment that makes it easy to enter virtual currencies
Bitcoin is attracting attention as an asset for hedging the decline in the value of legal tender (inflation) due to global monetary easing.
In addition, virtual currencies issued by banks and companies are now attracting attention.
For example, Facebook has announced a plan to issue a virtual currency called Libra, and Mitsubishi UFJ Financial Group has announced a policy to put MUFG coin into practical use.
If existing companies and financial institutions enter the cryptocurrency market in this way, more funds will be collected in the market and prices may rise.
Points to identify Bitcoin bubbles
In such a Bitcoin market, it will be very difficult to determine in advance whether it is a bubble or not.
However, paying attention to the daily economic situation increases the possibility of being able to detect it in advance.
The price of Bitcoin depends on the economic situation. Therefore, it is important to be sensitive to economic movements daily. For example, you may want to pay attention to the following.
- Laws and regulations regarding Bitcoin
- Entry of major companies and institutional investors
These are just examples, but Bitcoin is closely related to the economic situation. Therefore, getting information from various places will increase the possibility of determining whether the Bitcoin market is a bubble.
Identify the Bitcoin bubble and proceed with virtual currency trading
As mentioned above, it is essential to catch the economic situation to determine whether it is a bubble or not and proceed with virtual currency transactions.
Especially from the perspective of the Bitcoin bubble, there are four points to note.
- Bitcoin payments will become more widespread
- Bitcoin will become more popular
- Used by institutional investors as an inflation hedge asset
Bitcoin payments become more widespread
As Bitcoin payments become more widespread and available in different parts of our lives, Bitcoin prices are likely to rise.
By paying attention to news such as “Introducing Bitcoin payment” by a company that operates a well-known service, you will be able to grasp the timing of the rise in Bitcoin price.
Bitcoin’s popularity goes up even more
Bitcoin had little value at birth. However, there is a past that the price went up as it gradually became known to the world, and it went up at the timing introduced by TIME magazine in the United States.
Dogecoin, a cryptocurrency, is likely to rise in price as it grows in popularity, as is the case with the mention of prominent entrepreneur Elon Musk.
Half-life refers to the timing when the quantity of newly issued Bitcoins by mining is halved. Looking at historical statistics, Bitcoin prices have risen before and after the half-life.
In Bitcoin, this half-life is said to occur once every four years, most recently in May 2020.
Used by institutional investors as an inflation hedge asset
Currently, monetary easing is taking place in many countries due to the corona epidemic.
As the amount of money circulating in the market increases, the value of money declines and inflation occurs.
It is said that the purchase of Bitcoin by institutional investors as a means of hedging this inflation was behind the rise in Bitcoin prices since the beginning of 2021.
The entry of such institutional investors will be a factor pushing up Bitcoin prices.
Will the Bitcoin bubble continue?
Bitcoin has a lot of price fluctuations, so every time it rises, the possibility of a “bubble” is whispered.
It has been pointed out that it is still in the midst of a “bubble” that will continue from the end of 2020.
However, in the background of the bubble, there are various movements as explained so far.
Considering various factors surrounding Bitcoin, such as the entry of institutional investors and the spread of Bitcoin payments, why not determine whether the current Bitcoin market is a bubble or not.
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