After keeping a downward trend for almost a month, bitcoin is finally back to its ideal US$50,000 yesterday. While new investors were worried about the bitcoin price fall, little did long-term investors get intimidated by the value decrease. Many crypto investors are now getting used to the severe volatility of the market and they limit their investments based on their potential assets and handling capacity.
Bitcoin is now joining the list of big investments like gold and silver. Many are choosing cryptocurrency investment over other forms due to its value growth. While gold investors are often criticized as wealth preservers and silver, too heavy and bulky to store, digital tokens emerge as the best form of investment that could yield big benefits over time. Although bitcoin was introduced with the hope to revolutionize the financial ecosystem, people were not accepting the concept in the past. However, a decade after, the cryptocurrency is still trying its best to upturn the economic situation and streamline money in a decentralized model. Bitcoin has run into many troubles, scandals, mishaps, and wild price swings in recent years. After touching US$65,000 briefly in mid-April this year, it collapsed to US$35,000 before coming back to a moderate rate. Bitcoin value is solely based on market adoption and trend, which makes it even more volatile.
Governments are the biggest enemies to the bitcoin price. Recently, China has put a blanket ban on all cryptocurrency trading and movement in the country, pushing the bitcoin value to a further low. But in contrast, El Salvador became the first country ever to make bitcoin a legal tender. However, El Salvadorians were still wary of the move and said it could push the country into economic turmoil if not moderated properly. Since bitcoin price keeps swinging, their statement felt true and the market fluctuations can directly impact a government. Even though cryptocurrencies are ‘too large to ignore,’ there needs to be a framework that shields governments and people from falling victim to volatility.
Why Bitcoin is Not Financial Advisors’ First Choice?
Institutional investment in bitcoin is seen as the future of the cryptocurrency market. Yes, already many bit organizations like Tesla and MicroStrategy are coming forward to invest in bitcoin and other top digital tokens. In February, Tesla announced that the company has invested US$1.5 billion in bitcoin. Similarly, MicroStrategy has also proposed to issue US$600 million in convertible notes to buy more of the virtual coin. While institutional investment in cryptocurrency is heating up, financial advisors are still not putting bitcoin as their first choice. According to a survey in which 77 financial executives and 50 CFOs took part, a mere 5% of them responded to hold bitcoin on their company book this year. Over 84% of them said they had no plans to ever buy bitcoin assets.
Will Government Regulations Change this Scenario?
Maybe yes. A major reason for bitcoin reluctance is its market volatility and instability. Every time a government comes out with regulations or a ban, the bitcoin price falls drastically. Therefore, well-organized government regulations could save the cryptocurrency from volatility. However, many think that the bitcoin value growth is solely because of its decentralized nature and government rules could stagnate the growth. This was proved wrong by two professors of legal studies and business ethics who did research on it.
Brian Feinstein and Kevin Werbach insist that tighter regulations could purge the industry of bad actors and engender trust, which in turn would help it grow. The duo carefully examined the market trend and bitcoin value in regulated countries. The result is that the bitcoin price doesn’t go down always when regulations are brought to the mainstream.
Where to from Here?
The next decade will provide many options similar to bitcoin. But we can’t clearly say if those tenders have the capacity to take over bitcoin value and market capitalization. Already close competitors like Ethereum, Cardano, and dogecoin are trying their best to overtake bitcoin value for many years. But it is not easy and involves many aspects. Although bitcoin is the most adopted cryptocurrency, it is oscillating between being a store of value and a medium of daily transaction.
On the other hand, user convenience and security concerns also prevail in the decentralized model. Bitcoin should better its processing speed and should be able to do millions of transactions in a short span of time.
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