A time-tested rule of writing about cryptos is don’t write about cryptos. The crypto story is fast-moving. It can unfold in astonishingly unexpected ways, and soon, fans/investors will be lining up to tell you how wrong you had it all along.
But write about crypto, I must, because the past weeks have been catastrophic for bitcoin—the grand dame of crypto. Of course, the prime focus here is bitcoin, but if you follow cryptocurrency trends, you know that the market is troubled—and that’s putting it mildly.
Is Bitcoin Going to Crash Soon?
At the time of this writing, Bitcoin trading stands at $19,360, having fallen over 20% in the past week alone. It’s currently at its lowest in the last 18 months.
It’s not just bitcoin that’s struggling. The wider global climate isn’t looking good either. Recession looms, living cost bites, and interest rates continue to rise. Like the cryptocurrency market, stock markets around the world are also wobbling— the US S&P 500 is on a bear run, down 20% from previous highs.
Why Bitcoin Prices Are Dropping
Over the past few months, cryptos like bitcoin have posted much lower-than-expected profits. As a result, investors are increasingly deciding to short (sell up) bitcoin.
With more people willing to sell, the desirability of bitcoin drops. As a result, bitcoin becomes less worthy, its value crashes, and prices fall.
Unlike traditional assets like stocks, cryptos have no intrinsic value to underpin them. They lack brick and mortar assets, an underlying business, or revenue streams to support their inherent value. Therefore, the value of bitcoin depends purely on whether or not people are willing to buy it.
This fact can be pretty scary if you put it into consideration. Essentially, if too many investors head for the exit, there will be no floor to hold the coin’s value. Hence, there’s nothing to stop it from dropping to even $100 if enough people sell or give up bitcoin.
Why More People Are Willing to Sell Right Now
The economy is already challenging as it is. Additionally, a series of events happening over the past months might have spooked bitcoin investors.
- Binance, the world’s largest cryptocurrency exchange platform, paused all bitcoin transactions for a few hours citing a ‘stuck transaction’
- Celsius, a major cryptocurrency lender, also stopped bitcoin transactions temporarily due to extreme market conditions
- Coinbase, another crypto exchange platform, announced 18% layoffs of its workforce
- Several overvalued cryptocurrency projects (e.g., terra) collapsed
These factors, coupled with slow economic growth, high inflation, and the overall poor economic outlook, make investors avoid ‘risk-on’ assets which include cryptos like Bitcoin.
Can Things Turn Around for Bitcoin?
In a nutshell, investors need to stop selling and hold onto their bitcoin. Investors must also start buying more of this crypto coin to prevent it from crashing further.
Nonetheless, it might be a great time to buy bitcoin because it’s cheap. All you have to do after buying is hold onto it and wait for it to turn the corner. Once the price is high enough, you may then sell it for a profit.
A popular phrase in the crypto market is, “the pump always happens.” It means that even if the prices fall, buyers will come, go long when the price is low, and, in so doing, push the prices back up.
As a matter of fact, things could be worse. Bitcoin has suffered bigger losses and survived. During the 2018 crash, for instance, the coin lost 80% of its value and still made a magnificent comeback.
Therefore, going by previous trends, the prevailing downturn for bitcoin is only a temporary blip. The market is sure to change for the better sometime to come.
Is It Safe to Invest in Bitcoin Now?
Bitcoin, like all cryptocurrencies, is unpredictably volatile. It’s unprotected and lacks regulation by financial authorities. As a result, investing in Bitcoin may feel like a risk too great, especially in our currently troubled economic times.
Nevertheless, a wise investment strategy has been to “buy the dip.” Investors can take advantage of the overall volatility to buy Bitcoin for cheap. Previous trends have always been that the market picks and prices rise after every downturn.
Buy the dip is a wise strategy. However, investors must be warned not to burn themselves trying to catch falling knives. So, when buying the dip, one must only invest an amount of money they can afford to lose. It also helps if the investor diversifies their investment portfolio by trading other assets.
How Can I Mine Bitcoin?
Besides trading bitcoin, there are other ways of making money from this crypto. You could, for instance, accept bitcoin in exchange for the goods or services you provide.
Another way to benefit from bitcoin is by mining it. In fact, mining bitcoin is perhaps the most exciting way of making a profit because it sends you on an adventure-packed path of discovery.
Bitcoin Mining Explained
Mining bitcoins involves processing Bitcoin transactions, adding new blocks to the bitcoin blockchain, and essentially minting brand new bitcoins.
The key message here is that bitcoin miners maintain the bitcoin blockchain. In return, the miners get paid in small amounts of bitcoins. Bitcoin mining, therefore, is using the computing power available to you to get these bitcoin payments.
How To Mine Bitcoin
Anyone with a decent computer and strong, fast internet connectivity can mine bitcoin. The computer setup is generally referred to as the hardware. Bitcoin mining requires you to invest in powerful hardware. You are unlikely to make a profit using an old laptop or computer.
It’s best to buy a dedicated mining computer online. Note that setting up your mining rig will require extensive knowledge. You also require a valid bitcoin wallet to hold the proceeds from your mining activities.
Once your crypto mining rig is set up and you’ve downloaded a local copy of the bitcoin blockchain, you can officially start mining. The hardware does all the work of mining. It can work 24/7– all you have to do is check on it from time to time to ensure that it’s still mining.
Bitcoin Mining Pools
Bitcoin mining gets more challenging with time. The rewards also reduce as time goes by. As a solo miner, you are up competing against large mining operations. Suffice to say, your laptop is no match for their superior mining setups.
Therefore, many people often join mining pools to combine their computing powers and prowess with other miners to mine bitcoin collectively.
What Are the Chances of a New Currency Replacing Bitcoin?
Since it came into existence in 2009, bitcoin has grown to become the most widely used and trusted cryptocurrency. At the same time, developments in the crypto space have led to the emergence of a variety of different coins. Such coins include Ethereum, Cardano, and Solana, among others.
Each of these coins has unique features designed to help it compete with and possibly even replace Bitcoin as the top cryptocurrency. So far, however, none of them has come close to overtaking Bitcoin, and we can accurately state that they won’t be replacing bitcoin any time soon.