Making Sense of the Latest Bitcoin Surge

There’s a danger of getting involved in sensationalism every time you write an article about Bitcoin. News about the world’s most popular and well-established cryptocurrency always seems to refer to extremes. One moment you’re being told that the Bitcoin bubble has burst and investors are about to lose everything, and then the next, you’re being told it’s reaching record levels, and there’s never been a better time to get involved. A lack of understanding among the public (and even among the people who write about it) is often to blame for such reporting, but there’s a glimmer of truth to all the reporting, too. 

The truth in this case is that Bitcoin is just as unpredictable as it always has been, and we should take the current wave of optimism around the value of the coin with a healthy dose of salt. We’re barely a year on from the currency plumbing record depths and talk of the 2020 “halving” event being crucial for the coin’s future prospects. Many analysts and investors – some of whom have been around Bitcoin since its inception – were concerned that the currency could collapse completely if the halving event hadn’t gone well. Instead, here we are in March 2021, surrounded by good news stories about the coin crashing through the sixty thousand dollar barrier for the first time. In March 2020, a single coin was worth less than five thousand dollars. That kind of one-year growth simply can’t be achieved by almost any other type of investment, and that’s why people are still prepared to spend so much money on it.

Even as the virtual ink was drying on those giddy reports about the record-setting value, things were changing. It was once thought that Bitcoin would be immune to changing financial situations around the world because of its decentralized nature. We now know through bitter experience that this isn’t the case. Brexit had a profound impact on the value of Bitcoin, and so did many of the financial implications of the global pandemic that the world has spent the past twelve months battling through. The slightest piece of bad news in a sensitive area can result in a sharp shock when it comes to Bitcoin’s value. The sixty thousand dollar moment came in the early hours of Saturday, March 13th, and “moment” is the best word that can be used to describe it. By the early hours of Monday, March 15th, the moment had come and gone. Reports emerged over the weekend in India that the country is considering a total ban on cryptocurrencies of any description, and so the price took a tumble of over four percent back down to $57,800. By the time you read this, it’s just as likely to have jumped back above $60,000 as it is to have dropped to $50,000. That’s the problem with trying to report on or analyze Bitcoin in a nutshell – it moves so quickly that information is outdated almost from the moment it’s broadcast. 

Nobody who’s ever invested in Bitcoin – or even spent any time reading about it – needs to be reminded about how volatile it is. When it comes to volatility, it’s just about the most volatile thing you could spend money on outside of online slots websites. The extremely-popular online slots game Bonanza is a good example of this. Bonanza uses a mining theme, which is an excellent metaphor for mining Bitcoin, and could win you a life-changing amount of money if you get lucky within its incredibly complex free spins bonus feature. Alternatively, it could suck up your entire bankroll without even triggering that bonus feature, let alone letting you win anything from it. The volatility is all part of the excitement. While there are numerous differences between investing in Bitcoin and playing online slots, the core similarity is one that bears repeating: online slots players have no means of influencing the final outcome of their spins, and Bitcoin investors have no means of influencing the outcome of their investments. In both cases, even the mechanisms that might impact your chances of success are unknowable. 

When the dust settles on this latest wave of Bitcoin-related excitement and the luckiest of investors have cashed in on their good fortune, a more sober period of analysis is likely to follow. The hard reality that we have to face here is that Bitcoin is lucky that India isn’t a major market. The threat of a ban there only triggered a four percent “wobble” in value. Had it been one of the world’s larger economies, the effect would be far more significant – and that day will eventually come. The US government makes no secret of the fact that it isn’t a fan of cryptocurrencies and is currently considering a slew of potential regulatory activity. The British Government and the European Union have concerns, too. Regulation in any of those markets could be devastating to Bitcoin, and this time it wouldn’t be so easy for the coin to shake off the effects. A temporary fluctuation in Bitcoin’s price will eventually right itself when there aren’t regulations getting in the way. It’s far harder to see that happening when there are huge amounts of red tape holding it back. 

We know we run the risk of making ourselves look foolish by suggesting that investors exercise caution here. Perhaps you’re reading this in 2022 and laughing at how badly wrong we got it. Maybe the value of Bitcoin is now above one hundred thousand dollars and rising higher. As we said earlier, that’s always the risk you take when you write anything about Bitcoin at all. We know that could happen, but we also know – perhaps “fear” would be a better word – that you’re reading this in 2022 with a Bitcoin investment valued at less than ten thousand dollars, and you’re wondering where it all went wrong. This may indeed be the best time to have Bitcoin, but that doesn’t mean it’s the best time to buy it. It might prove to be the best time to sell it. Prices like these have never been achieved before and may never be achieved again. Because of the threat of future regulation, it’s entirely rational to believe that this might be as good as the good times ever get. Don’t get greedy if you’re holding on to your stock. If you’re being offered a rate of return that’s far, far higher than what you paid for your investment when you acquired it, this might be a good time to get out. 

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