Bitcoin’s price has changed abruptly on several occasions throughout the years. Some changes in the price depend on the cryptocurrency’s programming
Fear can be an obstacle or a stimulus to discover what is shown on the horizon. In terms of capital investment, fear can be the element of the equation that, because of its individual and subjective magnitude, would prevent Bitcoin’s volatility from being above the objective analysis of the market.
Many people that plan to buy Bitcoins or Ethers at this time are taking a very high risk. It is understandable to fear, since there are actors that cannot be controlled, such as changes in the cryptocurrency market, due to the uncertainty they generate.
However, Bitcoin only recently emerged as a response to the 2008-banking crisis. It is unlikely that exchange models based on a technology that cannot be altered by the interests of a small part of the community can be imposed.
In the same vein, nor is it likely that governments can impose payments with Bitcoin if central banks do not have the power to issue more currencies or to control issuers. In other words, if the adoption of Bitcoin grows transversally to more communities and production sectors and governments, the massification of Bitcoin will eventually balance the scales of prices.
Cycles and Predictions
Throughout time, Bitcoin’s adoption seems to have achieved rates closer to the event known as halving, a programmed mechanism that reduces every 210,000 blocks the number of bitcoins that miners get as a reward for helping to maintain and update the status of the blockchain.
The purpose of this reduction to half the reward is to decrease the frequency in which more coins are issued to avoid inflationary systems. Hence, in principle, Bitcoin should be worth more if it is possible to keep the offer from growing disproportionately.
But halving by itself would have no influence on markets without counting on the adoption factor. That is, the demand for cryptocurrencies is determined by their use and their ability to exchange value.
For this reason, those that study the market analyze the periods prior to halving. During the first years, the number of transactions increased due to traders’ activity, the growth of mining and the increase in the number of exchange houses available.
Maybe if the price cycles in the market are considered, the risk of making an investment in Bitcoin can be controlled. In this way, it would be possible to better understand which periods are the most favorable for buying, selling or maintaining funds.
An Unsupported System?
The volatility of the market represents the system of financial games. The fear of unknown actors, with their personal ambitions, judgments, interests, successes and failures should not condition the future of users’ money.
The analysis of Bitcoin’s price behavior over time suggests that the various increases and falls in its market price greatly depend on programmed factors or cycles of the particular Bitcoin market. However, market volatility is not so predictable in the short term.
If investment capital is diversified, it is most likely that part of the money is saved in dollars or euros and another part in objects that can be stored or used, having the expectation that beyond such investment, their use and their possible sale, can produce dividends. Bitcoin can be understood as another tool to transfer or save value. It is supported by a protocol that is immune to people’s psychological variations.
By Willmen Blanco
