Since investors have lost faith in the cryptocurrency market and prices have fallen, it seems that the bubble around bitcoin has burst:
The price increased by more than 700 percent in only one year in 2021, reaching a record high of $69,000 in November.
Let’s fast-forward to June 2022, when it fell to less than $18,000.
When the price of an asset rises swiftly and reaches a record high, a collapse or at the absolute least a correction—when the price drops back down to a more “normal” level—becomes far more probable.
It would seem that this is the state of bitcoin at the moment. The cryptocurrency took 11 years from its debut to reach a price of $20,000 per coin, but it only took three weeks for the price to double after that.
2013 was a pivotal year for cryptocurrency investors. The price of bitcoin increased from $13.40 at the beginning of the year to its peak of $1,156.10 in December before dropping to approximately $760 three days later.
It is also uncertain where it will go next.
Will Cryptocurrency Recover?
Regarding investing, there are no assurances. Bitcoin might rise again just as swiftly as it falls.
There are many issues with cryptocurrencies:
- Repression in nations like China
- worldwide calls for stricter regulation
- environment-related issues
- concerns with security and hackers
- Their pricing is completely dependent on conjecture.
The decentralization of crypto is seen as being threatened by further regulation, which is having an effect on the pricing of digital currencies.
Fans of bitcoin highlight these benefits:
- Technology that might revolutionize several sectors
- simpler and less expensive transactions by removing “middle parties” like banks
- Global trading would be simpler since there wouldn’t be any worries about exchange rates with a non-fiat digital money.
- The transactions are more private.
- Because it cannot be printed or confiscated, it is a secure way to keep value.
- Bitcoin has been promoted as a replacement for gold, thus it may prove to be an effective hedge against inflation.
Given its volatility, it’s feasible that bitcoin may at some time in the future regain its momentum (perhaps weeks, months or even years down the line).
But nobody has access to a crystal ball. Therefore, it is difficult to predict with certainty if bitcoin will fall in the future.
Will the Price of Bitcoin Rise if the Stock Market Falls?
No, not always. Bitcoin is seen as a diversifier in balanced portfolios by its proponents, yet during the beginning of the coronavirus outbreak, it performed no better than equities. Investors panicked and sold everything, which is why.
Bitcoin saw a decline of more than 40% in the first two weeks of March 2020.
Because of worries over Covid-19, all stock markets had an aggressive run down at that time, according to Rosie Bullard, partner and portfolio manager at James Hambro & Partners. So, with a downturn in the equities market, it wasn’t exactly a store of wealth.
You won’t find a sudden bitcoin rise in March of last year, when the market crashed, if you think back to that time.
Portfolio manager Rosie Bullard, a partner at James Hambro & Partners
Having said that, the reason for the collapse of the financial markets will affect how crypto assets perform when the stock market crashes.
Most bitcoin investors think it would provide security if it were all about an inflationary crisis, like what occurred in 1974.