Wednesday, June 30, 2021/12:50PM/Sponsored Post by Media Africa /Header Image Credit: Media Africa
Is this the end of the Bitcoin bubble?
Can you still make money with Bitcoin in 2021? And should you still buy Bitcoin in Nigeria? These are the questions bubbling through the minds of some traders, especially the newbies.
The price of Bitcoin this time last year was around $9400 and today it is trading around $33,000. The price of Bitcoin has increased by almost 4X.
Having skyrocketed from a low of $9400 to an all-time high of $63,500 and now dipping to the current price of $38,800, it is enough to wonder if bitcoin is a bubble that is ready to burst.
Was the price movement a bubble, and could it be that the price crashed because the bubble has burst? Before we can conclude, let us discuss what a bubble is.
Find out more about the recent crash in Bitcoin price.
What is a Bubble?
A bubble begins when the price of an asset rises far higher than it can be explained by fundamentals, such as the return likely to derive from holding an asset.
It involves buying an asset at a fictitious price with the hope to be able to sell it off to make a huge unreal profit. Most times, Investment in bubbles end terribly because their price eventually crashes.
The concept of a bubble is not strange in the stock exchange market and real estate. It is also applicable to the crypto market. Bubbles in a crypto market are usually caused by pump and dump & FOMO.
For example, if you had bought Bitcoin when it was over $63,000 with the hope that it will be well above $100,000 in no time, then that is a bubble. In simple terms, a bubble is when an asset is overvalued.
Is Bitcoin a Bubble?
So many anti-Bitcoiners have come to justify their saying that Bitcoin is a bubble. The truth is, it is because they do not understand what Bitcoin is. Bitcoin price is not overvalued like every bubble you come across in the stock market and other markets, before experts say the price of an asset is overvalued, there is a generally accepted model or criteria that is used to conclude.
Bitcoin has been argued not to be a bubble because the price is not determined by any individual, group, or government. It is determined by the forces of demand and supply. However, we need to clarify that Bitcoin might not be a bubble in its totality, but some pump and dump schemes can be termed as a bubble.
Pump and dumps are initiated by crypto whales who hold a large volume of Bitcoin. They buy or transfer a large amount of Bitcoin causing its price to increase and when they hit their target they sell-off causing the price to plummet.
These pump and dump schemes can be referred to as a bubble because at that point Bitcoin price has risen to a higher level that cannot be explained by fundamentals and is overvalued.
What causes the Bitcoin Price Crash?
We have established that it is the forces of demand and supply that control the price of Bitcoin. Some factors can influence the demand and supply, hence influencing the price. These factors include technological advancement, mass media, mass adoption, government regulation...
One of the factors that caused the recent bitcoin crash was Elon Musk's negative comment about bitcoin. The 3rd richest man commented on the negative impact of bitcoin mining on the environment due to the high energy consumption involved.
However, the price of Bitcoin did not plummet solely because of the comment. The crash has been well predicted before the event because the price of Bitcoin has increased more than it is supposed to within a short period and the market needed to correct itself. So, the price crash after Elon musk's comment was just a coincidence.
It should be noted that Elen Must has previously shown his support for bitcoin and even invested in bitcoin, causing massive adoption, which pushed the price beyond the 50k zone.
Can You Still Make Money with Bitcoin?
The answer to the question is undoubtedly YES. Nigerians should definitely buy Bitcoin with Naira now because Bitcoin at $35,000 is still cheap. Analysts say Bitcoin even at $100,000 is still cheap. But would you rather buy at $35,000 or at $100,000? Bitcoin isn't a get-rich-quick scheme or a Ponzi scheme, so the price crash is very much understandable and should always be anticipated.
The same thing happened at the end of 2018 when the price fell from as high as $20,000 to $4000 before the end of the year. If you were fortunate to buy Bitcoin at that time, you would have made a massive profit within 3 years. The recent bitcoin crash should be a motivation for Nigerians to buy Bitcoin now because it is going to rise again and a new All-time-high (ATH) will be attained.
So, of course, you can still make money with Bitcoin either through day trading or through long-term investment, you just need to act now.
Should You Still Buy Bitcoin in Nigeria?
You should buy Bitcoin in Nigeria Now if you have the money, this bear period is one of the good times to buy Bitcoin in Nigeria because once the bull takes over it might be late for you to catch the train.
However, always remember that the money you should use to invest should be money you are willing to lose without much regret.
In conclusion, do not put all your eggs in one basket and do not invest all your savings in BTC. You should only invest the money you can lose without much regret. Always do your research before entering the market and do not succumb to FOMO.
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