Since December 16, 2020, Bitcoin has doubled to hit almost US$42,000 before undergoing a correction in the last two weeks. Many naysayers relish this opportunity to negatively opine on Bitcoin’s volatility.
Volatility seems to be hallmark of crypto trading. As most seasoned crypto traders would attest, there are basically very little valuation models which can be applied to crypto. In the absence of a credible valuation model, one cannot derive a fair value for an asset. Hence, whatever price a crypto arrives at largely depend on whales (individuals who hold large quantities of a cryptocurrency), herd instinct, technical charts and to a mathematical degree, the token economics surrounding the cryptocurrency.
Seasoned crypto traders would yawn at the volatility experienced by Bitcoin in the last two weeks. First of all, it would seem incredulous to expect bitcoin price to keep charging ahead without experiencing a retracement of sort. The bubble will just get bigger and we all know how it goes when a huge bubble pops. In fact, this short period of consolidation serves as an indicator of a healthy market system.
There is also a marked interest in buying activity at or near the US$30,000 level. Microstrategy’s recent announcement of their US$10 million purchase worth of Bitcoin at an average price of US$31,808 lends credence to institutional support at the US$30,000 mark.
As of this writing, Bitcoin has recovered to US$34,000 from a low of US$30,000 just a week ago. Many new crypto investors were undoubtedly frightened by such large beta swings and would naturally be rushing for the exit. One will always hear bombastic statements like “testing new highs and if it cannot be breached, would break support line”… yada yada. Analysts always rationalise a market movement.
Such swings are going to repeat over and over again. If you decide to invest in your first Bitcoin, be prepared mentally, emotionally and financially. You may lose it all. But, if you choose to onboard the crypto bandwagon, you need to stomach the volatility.
[ Read more: Bitcoin Realised Volatility at its Highest Since Black Thursday Crash in 2020 ]
[ Read more: Bitcoin Has Worst Week Since September 2020 ]
[ Read more: Top Five Reasons Ethereum May Hit US$5,000 by 2022 ]
