The sentiment around Bitcoin is causing concern and anxiety. Will the price of $BTC fall further? Is the bull market over? Should investors sell everything and get out while they can? No! Bitcoin is still in its bull market. It has a long way to go, and if the price does drop, it could be another potential opportunity to buy more.
The Worrisome Volatility of the Cryptocurrency Market
For those new to crypto, price fluctuations can sometimes be unsettling. One week, Bitcoin is knocking on the door of its previous all-time high; the next week, it’s threatening to fall off a cliff and descend into a bear market prematurely.
However, that’s how it is, and sometimes it’s just a matter of holding on for the long haul. That said, when comparing previous bull market corrections to the current ones, the 20% corrections Bitcoin is currently facing are much smaller than the 30%, 40%, or even up to 70% corrections seen in past bull markets.
Experienced traders would always say that the best time to invest is when the market looks like it’s about to drop (or just did) and when you feel sick to your stomach and the last thing you want to do is put in more money.
For all this, the main thing is to consider what Bitcoin is and also what fiat currency is. Let’s start with fiat.
What Is Fiat Currency?
“Fiat” is a term used for currency that has no intrinsic value behind it. Healthy backing would be something like gold or silver to which the currency is tied. This used to be the case in the U.S. until President Nixon removed the U.S. dollar from its partial gold backing in 1971. The reason for this was that gold backing required the U.S. government to be very conservative and only spend what it could afford.
Once Nixon removed it, the genie was out of the bottle, and since then the U.S. government has been able to spend whatever it wants, going to war or continuing to print to pay the interest—leading to increasing debt.
The term “fiat” also means currency issued by a government, which derives its value from the trust in that government’s ability to repay its debts.
The constant battles of wars and the subsequent printing of more and more fiat money to fund that debt and those wars mean that an ever-increasing avalanche of money enters the system, thereby reducing the existing fiat currency and depreciating its value.
For the wealthy, this isn’t really problematic because they own assets. As the value of the currency decreases, asset prices rise. However, the poor and many in the middle class generally don’t have assets, so their wealth diminishes as depreciation steals from them.
Therefore, when you sell your Bitcoin, you are choosing to sell an asset that is much rarer than gold and, moreover, you are choosing to replace it with fiat currency.
Once you make the exchange, your fiat currency is like an ice cube melting in the bank, which, according to macroeconomic analyst and investor Raoul Pal, generally loses about 12% per year in purchasing power (about 4% due to inflation and 8% due to debasement).
What Is Bitcoin?
Bitcoin is a digital asset that anyone on earth can own, with the only possible barrier to entry being a mobile phone.
Bitcoin is extremely rare. The total supply is capped at 21 million BTC. Of this amount, approximately 6 million have been permanently lost. More than 19 million BTC have already been issued, leaving fewer than 2 million to come over the next decades.
A holder can send Bitcoin to anyone in any country on the planet, and it cannot be confiscated by any government or its agency. In its short 15-year lifespan, it has appreciated in value against the U.S. dollar by approximately 22 million percent.
Over the next decades, it will undoubtedly continue to gain more value compared to all fiat currencies, stocks, real estate, gold, silver, and any other asset in the world. In fact, it could be said that Bitcoin is consuming everything.
A Long-Term Perspective
In conclusion—if you bought Bitcoin, why would you worry about the price? Of course, it should be noted that your time horizon needs to be long. The aforementioned volatility in Bitcoin can sometimes swing the price wildly up and down, but if you hold this asset for the next 10 years, past price history suggests that this asset should continue to rise in value.
Finally, nothing is certain in the markets, and even Bitcoin could suffer some kind of black swan event in the future. Hedging into other “liquid” assets, such as gold or silver, or certain technology stocks, could offer a more secure portfolio. Due diligence and research on all held assets is perhaps a good strategy.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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