Crypto-investors have recently expressed concern over the price fluctuations of Bitcoin. Please find below the Kyrrex forecasts on the present state of Bitcoin, the causes for price volatility, and expectations for future changes.
Bitcoin's price has been trending downwards recently. Its value began to drop in November 2021 after hitting an all-time high of about $69,000 earlier that month. On January 24, 2022, this cryptocurrency declined to almost $33,000. It represents a price drop of more than 50% compared to the historical maximum.
Lately, Bitcoin's value has begun to stabilize, and it hasn't fallen below $40,000 since February 4. Today, we'll look at what triggers such price swings, how they affect investors, and what to expect in the future.
What Causes Bitcoin's Price Fluctuations?
It's significant to keep in mind that the value of cryptocurrencies is closely related to the state of traditional markets. Therefore, the stock market correction is one of the primary causes of Bitcoin's drop.
The United States' inflation rate has hit 7.5%, a record for the last 40 years. As a result, the U.S. Federal Reserve System will soon change its monetary policy by raising fund rates. It will cause a price drop of stocks, currencies, and risky assets such as cryptocurrencies. Thus, the Fed's intentions to keep inflation under control have significantly shaken the crypto market.
Furthermore, the Biden-led government is working on a strategy to handle the economic and regulatory concerns that surround Bitcoin and other digital assets. The U.S. presidential administration is studying the opportunities presented by cryptocurrencies, and will declare its policy in February. This information prompted investors to sell their cryptocurrencies, which was one of the reasons for the fall in Bitcoin price.
Bitcoin is a particularly volatile asset. It is influenced not only by economic factors but also by geopolitical ones. Consider, for example, the recent events in Kazakhstan, which resulted in a dramatic drop in Bitcoin value.
What Should Crypto Investors Do?
First of all, investors need to remain calm and consider the factors influencing the movement of Bitcoin prices. It's essential to pay attention to the latest news concerning government policy changes and the events in Bitcoin and traditional financial markets.
Volatility is not a new phenomenon, and it makes sense in the crypto world. As a result, crypto-investors, particularly long-term ones, should be prepared for price swings. Buying and holding is the best strategy right now. That is, the wisest move an investor can make is to avoid being hasty.
Experts also emphasize the importance of portfolio diversification. Specifically, do not put more than 5% of one's money into highly-volatile digital assets like Bitcoin. Such measures will protect investors from unexpected price fluctuations and asset losses.
Some possible Bitcoin price predictions in 2022
Given that Bitcoin is a volatile cryptocurrency, its current growth of more than $40,000 is not permanent, and this still does not mean that its value will go further up.
As the global economy stabilizes, we expect Bitcoin and other virtual assets to grow. Lower central bank rates will also have a significant impact on crypto. Investors will be increasingly interested in digital assets if these rates decline.
However, there is a chance that the price of Bitcoin will drop again soon. We estimate a limit of $30-35,000 as a bottom. Much critical decline is unlikely. It is a direct result of numerous experienced participants entering the crypto market. Their right actions in the cryptocurrency space reduce the volatility of Bitcoin and other cryptocurrencies.
The market scenario will begin to improve once the value of Bitcoin reaches its lowest point. And theoretically, this cryptocurrency will rise again in the second part of 2022.