Will Bitcoin crash? Explain how to grasp the risk and proceed with the transaction: Bitcoin, which showed a large price increase from the end of 2020 to 2021, is drawing attention to future price movements. In line with these movements, many people are thinking, “Let’s study Bitcoin and start investing now.” However, the sharp rise in Bitcoin has always whispered the possibility of a crash.
In this article, we will explain why Bitcoin prices crash and how to reduce the risk of loss due to the crash.
Will Bitcoin crash?
As of May 2021, Bitcoin has been priced at around 6 million (1 BTC), but it has been pointed out that it may have plummeted due to the significant price increase over the last six months.
The cryptocurrency market represented by Bitcoin has a short history and a wide range of price movements, so it is necessary to always anticipate the risk of a crash. Let’s check the factors that cause the crash below.
Why Bitcoin Prices Crash
There are four main reasons why the Bitcoin price crashes.
・ Regulations by the government
・ financial situation changes
・ Some fraud is discovered
・ Massive sales
・ Regulations by the country
Not only in India, but virtual currencies such as Bitcoin also have a short history, so it is said that the legislation is inadequate.
In some cases, the soundness of the market will be guaranteed and transactions will be activated by the establishment of regulations, but there is also the possibility that the transactions that have been conducted so far will not be possible.
In that case, more people will be worried about the future, the entire cryptocurrency market will be sluggish, and the price of Bitcoin may fall.
・ financial situation changes
It is said that the background of the rise in Bitcoin prices from 2020 to 2021 is the monetary easing of each country due to the corona disaster. The decline in fiat currencies has led to an influx of funds into Bitcoin as an asset for hedging inflation.
In this way, the virtual currency market is inevitably affected by the financial situation of each country. It’s also important to understand that a crash can occur depending on monetary policy trends.
・ Injustice is discovered
Currently, various measures are being taken to improve the security of exchanges and legislation regarding virtual currencies. However, in the past, there have been accidents in which virtual currencies were illegally leaked due to hacking of exchanges.
If the image of the entire virtual currency deteriorates due to such an accident, it will lead to a crash in the price of Bitcoin.
・ A large number of sales will be made
People who currently have a large amount of Bitcoin may crash by closing their positions and letting go of Bitcoin.
Can Bitcoin crash be expected?
In conclusion, it is difficult to accurately predict the Bitcoin crash. However, it is possible to predict a certain direction from various information such as market trends and the monetary policy of each country. Therefore, it is important to keep an antenna daily for various information.
Also, even if it crashes, the policy you should take depends on your investment policy. If you are assuming long-term holding, you can think of the crash as an “opportunity to buy more.” Therefore, it may be possible to reduce mental damage by deciding in advance what to do in the event of a crash.
What is the difference between Bitcoin and regular investment?
Investing in cryptocurrencies such as Bitcoin and investing in stocks have some similarities, but some differences.
For example, stock investment can only be traded while the exchange is open on weekdays. However, cryptocurrencies can always be traded.
In addition, the most distinctive feature of cryptocurrency investment represented by Bitcoin is that it can be expected to have high risk and high return. Looking at past price movements, it seems that those who have held Bitcoin for a long time have greatly benefited from the price increase.
Cryptocurrencies such as Bitcoin can be said to be a very attractive investment target for those who have a certain amount of surplus funds and can tolerate some risk to aim for a lot of money.
Let’s proceed with Bitcoin trading while predicting a crash
Bitcoin has the appeal of being able to expect a large price increase, but as I have explained so far, there is always the possibility of a crash. Therefore, risk management is important for holding Bitcoin.
・ Get the world situation in the news etc.
・ Determine the loss cut line firmly
・ Invest with a reasonable range of funds
・ Be careful about the security of passwords etc.
If you are investing in Bitcoin, you need to keep these points in mind when proceeding with your transactions.
Again, Bitcoin is a high-risk, high-return investment product. However, if you invest with the funds you can tolerate, you can expect a big price increase in the future, and it can be said that it is a valuable existence that will change the portfolio.
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