Why worry about the Bitcoin price?

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As a seasoned crypto investor with a deep understanding of the volatility and unpredictability of the market, I remain optimistic about Bitcoin’s future. The current dip in price may cause anxiety for some, but it presents an opportunity to buy more at a lower cost.

As a crypto investor, I understand the current anxiety surrounding Bitcoin‘s price action. The fear of missing out on profits or the fear of losing previously gained investments can be overwhelming. However, it’s important to remember that we are still in the bull market for Bitcoin. Yes, the price may dip, but this is a normal part of the market cycle. Instead of panicking and selling, see these dips as potential buying opportunities. The long-term growth prospects for Bitcoin remain strong, so holding on to your investments could yield significant returns in the future.

The unnerving ups and downs of the crypto market

For crypto beginners, the volatile price fluctuations might cause anxiety. At times, Bitcoin appears poised to surpass its past record-high, while other moments see it teetering on the brink of a potential bear market plunge.

Despite the current turbulence, it’s important to remember that such market fluctuations are a natural part of the cycle. When looking back at past bull markets, the present-day 20% corrections for Bitcoin appear milder in comparison. Previous corrections ranged from 30% to an extreme of 70%.

Seasoned investors often advise that the optimal moment to enter the market is when it appears to be on the verge of collapsing (or has recently done so), and when you feel uneasy or nauseous at the thought of investing additional funds.

To truly understand the significance of Bitcoin, it’s essential to first grasp the concepts of both Bitcoin and the current fiat monetary system. Let’s begin by examining the fiat money system:

What is fiat currency?

As a financial analyst, I would explain it this way: “Fiat currency,” which is a term I use to describe money with no physical backing, such as gold or silver, has been in circulation since its inception. Historically, currencies were tied to commodities like gold or silver, ensuring their value was anchored to something tangible. However, starting in 1971, the US President Nixon made a significant shift by removing the US dollar‘s partial gold backing. This move granted the government more flexibility in spending, as they no longer had to restrict themselves based on the amount of available gold or silver.

Since Nixon’s decision not to convert dollars held by foreign countries into gold at the fixed rate, the US government has had the flexibility to spend and print money without restriction for entering wars or paying off escalating debt interests.

“Fiat” is another term for a government-issued currency, whose value is based on the faith and confidence in the government’s capacity to repay its financial obligations.

Chronic warfare and the resulting need to produce vast quantities of paper money to fund debts and military expenditures lead to progressively larger influxes of currency in circulation. Consequently, the purchasing power of the existing fiat currency is gradually weakened as its value becomes diluted.

Wealthy individuals are unfazed by this situation since they own valuable assets. When the currency value drops, the price of their assets tends to increase. Contrarily, the less fortunate and a significant portion of the middle class don’t typically own assets. As a result, their wealth erodes as inflation takes its toll on their earnings.

When you decide to cash out your Bitcoins, you’re essentially opting to exchange a digital asset that is less abundant than gold for traditional paper money.

As a crypto investor, after completing the currency swap, I can’t help but feel that my fiat money is gradually melting away in my bank account. Macro analyst and investor Raoul Pal predicts an average annual loss of around 12% in the purchasing power of fiat currency. This equates to roughly 4% due to inflation and another 8% as a result of debasement.

What is Bitcoin?

Bitcoin represents a digital property accessible to every person worldwide, the primary requirement being possession of a mobile phone as the sole potential hurdle for acquisition.

Bitcoins are extremely limited in number, with a total supply capped at 21 million. Approximately 6 million of these digital coins have been irretrievably lost. Over 19 million have already been mined and circulated, leaving under 2 million left for future production over the long term.

A container can transfer Bitcoins to recipients anywhere globally, making them immune to seizure by governments or their respective entities. In just over a decade and a half, this digital currency has seen its worth surge approximately 22 million times against the US dollar.

Bitcoin is likely to increasingly outshine the value of fiat currencies, stocks, real estate, gold, silver, and all other global assets over the next few decades. One could even go so far as to say that Bitcoin is gradually devouring or surpassing their values.

A long term time horizon

As a researcher studying Bitcoin, I’ve come to find that holding onto this asset for an extended period is key to overlooking its volatile price swings. While it’s natural to be concerned about the short-term fluctuations, history indicates that if you hold Bitcoin for the next decade, it’s likely to appreciate in value.

In conclusion, market uncertainties remain, and Bitcoin is not immune to unexpected events. Diversifying your investments into reliable assets like gold, silver, or select tech stocks can help fortify your portfolio. Thoroughly examining each asset beforehand is also essential for making informed decisions.

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2024-07-01 14:05