Bitcoin Price Falls by Half From Its High

Monday, May 9, 2022
author picture Gerald Girard
Video/image source : youtube, imageswsj
Original content created by staff

Bitcoin Price Falls by Half From Its High

This past weekend‚ the price of Bitcoin continued its precipitous fall and continued falling on Monday. The crypto fell 5.2% in the past 24 hours‚ to $32‚940 at 7 a.m. ET. That drop is the third largest in a week‚ and it's now less than half its all-time high of $69‚000‚ hit last November. Ethereum‚ the second-largest crypto by market cap‚ also fell 5% over the weekend.

Cryptocurrencies are correlated with traditional assets

While cryptocurrencies are correlated with traditional assets‚ many investors and traders wonder whether this correlation is relevant to their markets. Correlation theory establishes statistical relationships between assets‚ such as stocks‚ bonds‚ and currency. However‚ there is currently no clear-cut use case for cryptocurrencies in economics and financial accounting. Furthermore‚ there is a lack of publicly available data to support these claims. Regardless‚ these studies do provide valuable information. As for the question of whether cryptocurrencies are correlated with traditional assets‚ there are several reasons. For one‚ they are known for their extreme volatility. For example‚ Ethereum started 2021 at $730 and hit $4‚080 by May. Afterwards‚ it dropped to $1‚786 and finally hit $4‚082 by late October. But the fact remains that cryptocurrencies are not completely free of risk‚ according to Venn. Previously‚ Bitcoin was considered a safe haven asset‚ as it does not react to macroeconomic factors‚ such as stock market fluctuations. This correlation may be a temporary phenomenon caused by the pandemic. The 2020 policy changes led to a significant increase in the money supply‚ the fastest growth since 1981. The lower interest rates spurred the demand for equities‚ and the money supply increased cryptocurrency prices. Furthermore‚ extreme money growth has historically raised inflation and debasement fears. However‚ the current trend suggests that cryptocurrencies are correlated with traditional assets. The correlation between cryptocurrencies and traditional assets has become tighter in recent years. Since 2020‚ the price of Bitcoin has become closely tied to the prices of the MSCI All Country World Index‚ a benchmark index for global equity prices. In the past two years‚ correlations between Bitcoin and government bonds‚ crude oil‚ and technology stocks have increased significantly. These findings are encouraging for investors seeking to hedge against inflation and slowdown in economic growth. Despite the volatility of cryptocurrency‚ the fact that the price of bitcoin fell nearly 50% in just a few months suggests that it offers investors diversification benefits. However‚ it's not a good investment choice for those looking for a short-term investment strategy. Instead‚ it is best for traders and investors with a long-term time horizon. However‚ for the majority of investors‚ stocks and bonds should be the primary focus of their investment portfolios.

Bitcoin is a great long-term investment

There are many reasons to invest in Bitcoin‚ but there are also some important things to consider before doing so. This highly volatile asset is highly risky. While the short-term price fluctuations are relatively small‚ they can drastically change over the long-term. As such‚ you should review your risk tolerance to determine if Bitcoin is the right long-term investment for you. As with any investment‚ if you're uncomfortable with volatile assets‚ you should not invest. One of the reasons to invest in bitcoin is its ability to appreciate in value over time. While the price of bitcoin is volatile‚ it has also consistently outperformed many other investments in the past decade. It recently made news when Tesla announced that it would accept bitcoin as payment for its cars. Musk later rescinded that announcement because of concerns over environmental issues. Some other big names in the financial world have begun accepting bitcoin as payment. Some of these companies include Microsoft‚ PayPal‚ The Home Depot‚ and Rakuten. The largest bitcoin holder is MicroStrategy‚ which holds 121‚000 coins worth $5.74 billion. Because of the complexities of cryptocurrency‚ few people understand it. The lack of understanding makes people susceptible to scams and fraudulent investments. Make sure you are investing only the amount of money you can lose. Remember that making money depends on the price at which you sell the asset. If the price has risen significantly‚ you've made a profit. Conversely‚ if the price drops significantly‚ you've lost money. Remember that Bitcoin is extremely volatile. Avoid panic buying and selling if the price drops significantly. If you're interested in investing in Bitcoin‚ there are many advantages. The price can increase rapidly‚ so you can take advantage of a market surge. This will allow you to sell your Bitcoins at a much higher price later when the demand is high. If you're willing to wait‚ you may even see prices rise by as much as 200%. That's a huge return. That's why many people are rushing to invest in Bitcoin. While Bitcoin is an excellent long-term investment‚ its volatility should be noted. The price of Bitcoin has experienced dramatic ups and downs in the past few years. While it reached a record high last week‚ it plunged to a low of $5‚000 within a matter of days. The price of Bitcoin is highly volatile and should be limited to less than 5% of your portfolio. As such‚ it is essential to consider the risks and potential benefits of cryptocurrency investments before you invest. If you plan on investing in Bitcoin in the long term‚ it is essential to understand how volatility works and how to minimize it. As with any investment‚ volatility causes uncertainty and fear of missing out. Ideally‚ you would purchase the currency when prices are low and sell at a high price. But this is easier said than done. One way to reduce the impact of price volatility is through dollar-cost averaging. In this way‚ you can spread your investments over a longer period of time and reduce your overall risk.

It's legal tender in two countries

After El Salvador‚ the Central African Republic has also recently made bitcoin legal tender. This small Central American nation with a population of about 6.5 million is currently ranked 112th in GDP per capita. Although El Salvador currently uses the US dollar as its legal tender‚ it will be adding Bitcoin as legal tender in September 2021. The Central African Republic has many repressive economic conditions‚ which may make bitcoin a more attractive option for consumers. While bitcoin is a volatile asset‚ it has recently become a legal tender in two countries: the Central African Republic and El Salvador. Last year‚ El Salvador legalized bitcoin as its official currency. This year‚ lawmakers in the Central African Republic unanimously approved a law making bitcoin legal tender alongside the regional CFA franc. The move was lauded by president Faustin-Archange Touadera and his team‚ and is an important step in the country's financial reform. El Salvador's decision to make bitcoin legal tender was met with a lot of controversy and protest. El Salvador is one of the poorest countries in the world. In 2010‚ 71% of its population lived below the international poverty line. Since then‚ it has been suffering from violent conflict and political instability. While El Salvador has been largely criticized for its move‚ many in the crypto community have welcomed the new currency. The move will further increase adoption of cryptocurrencies in developing countries. While there are fewer states that have made Bitcoin legal tender‚ there are still some opportunities for other states to do so. Many states are more open to accepting bitcoin than others‚ especially if their national currencies are in competition with the digital currency. The United States has also welcomed the use of bitcoin‚ and it is making its way to the derivatives markets. It is unclear whether or not the currency will become widely accepted in all of these countries. El Salvador made Bitcoin legal tender on Tuesday‚ making it the first country in the world to do so. The country's digital wallet app was opened to consumers and residents. Nayib Bukele‚ a government official and a cryptocurrency advocate‚ says the move is a step in the right direction. Bitcoin will be a valuable way to remit money to the country's citizens. The decision has prompted widespread criticism from economists and activists of the digital currency. Although the international community has expressed concern over the recent decision of the El Salvadorian court‚ the US government has largely ignored the pending case. El Salvador's president‚ backed by his party‚ declared himself president for a second term in 2024‚ and the country's citizens were expected to accept it as legal tender. This move by El Salvador will have a ripple effect on other countries that are facing similar situations.