Bitcoin has taken us on a roller coaster ride “again” lately, with sharp rises and falls, riding on a wave of strong news flow that has been shaking up the indices globally.
In this article:
- What is it with the volatility?
- Due to hit $100,000?
- Due for a crash?
- Warren Buffet thinks bullish!
- Uncertainty in the air
Consequently, the market is gradually recovering from the big plunge it took late last year. However, it’s still a long way from the all-time high of $69,000 recorded in November last year.
On a bullish trend, Bitcoin on Wednesday rose to US$44,188 after falling as low as US$36,370 last week. Other leading cryptos, including Ethereum, Ripple and Solana, were either flat or saw gains of at least 2%.
Further, Bitcoin prices are rising, following a plunge in the Ruble this week — a sign, according to some analysts, that Russian investors are shifting their money out of as economic sanctions against the country for its invasion of Ukraine take hold.
Volatility is the “name of the game” within the crypto ecosystem: if it has happened before, it will happen again. However, many crypto-pundits say it will hit US$100,00 this year, although sceptics say bitcoin is due for a crash.
What is it with the volatility?
Bitcoin’s lagging price in recent weeks comes amidst a continuing inflation surge, the stock market’s worst month since March 2020, and ongoing signals that the US Federal Reserve will begin raising rates at its next meeting this month to counteract inflation.
In the UK, the national interest rate is now 0.5%, after the Bank of England voted to increase the base rate last month in response to soaring inflation which the bank has forecast will peak at 7.5% in April.
In Asia, China has cracked down hard on crypto, declaring all financial transactions involving cryptocurrencies illegal and issuing a nationwide ban on crypto mining.
Meanwhile in India, the government has decided to formally recognise crypto trading, while also discouraging it by imposing a stiff levy on transactions.
Russia is following suit with reports suggesting a potential ban on crypto operations
Also, Russia’s invasion of Ukraine initially sent Bitcoin’s price tumbling to below $35,000 last week, though it has risen since then and got back above US$40,000.
Due to hit $100,000?
Despite the volatility and recent slumping price, many experts believe Bitcoin is on its way to passing the $100,000 mark, though with varying opinions on exactly when that will happen.
A recent study by Deutsche Bank found that about a quarter of Bitcoin investors believe Bitcoin prices will be over $110,000 in five years.
Big financial institutions have made their predictions, as well, with JPMorgan predicting a long-term high of US$146,000 and Bloomberg predicting it could hit US$400,000 if the currency climbs at rates comparable to the past.
In a recent report, global financial player Goldman Sachs (NYSE:GS) mentioned that Bitcoin can reach a valuation of $100,000 in the not-so-distant future.
Due for a crash?
Carol Alexander, professor of finance at Sussex University, said she expects bitcoin to tank to as low as $10,000 in 2022, virtually wiping out all its gains in the past year and a half.
“If I were an investor now, I would think about coming out of bitcoin soon because its price will probably crash next year,”, she said
Alexander warned of history repeating itself. In 2018, bitcoin declined close to $3,000 after climbing to a high of nearly $20,000 a few months earlier.
Todd Lowenstein, chief equity strategist of Union Bank’s private banking arm said: “Without question, Bitcoin’s price chart appears to track many historical asset bubbles and busts and is carrying a ‘this time it’s different’ narrative, just like other bubbles.”
“Goldilocks conditions are ending, and the liquidity tide is receding which will disproportionately harm overvalued asset classes and speculative areas of the market including cryptocurrencies,” he said.
Warren Buffet thinks bullish!
Warren Buffett’s Berkshire Hathaway (NYSE:BRK) just bought $1 billion worth of stock in Nubank, one of Brazil’s largest fintech banks focused on cryptocurrencies.
Interestingly, the investments are interesting given Buffett, also called the ‘sage of Omaha’, has always been against cryptocurrency and has even called it ‘rat poison’
While Nubank does not allow trading in cryptocurrencies, its investment unit NuInvest allows customers to invest in Bitcoin exchange-traded funds (ETFs).
Uncertainty in the air
Depending on whom you ask, blockchain technology is either a revolutionary and disruptive development or a bubble that is on the verge of exploding.
Whatever you think of the underlying technology, you can’t deny that blockchain-based assets like cryptocurrencies—and more recently, non-fungible tokens (NFTs)—have exploded.
No one can say with certainty that the crypto bubble is about to burst.
Whether you have the stomach to find out depends entirely on your personal level of risk tolerance and ability to deal with the toll crypto can take on your mental and emotional health.