Bitcoin, along with other cryptocurrencies, had a wild ride in 2021. Bitcoin started 2021 just above $33,000 and ended 2021 at over $47,000, while having an all-time high of over $68,000 in November.
With gamblers using Bitcoin to place bets on NFL lines, should the casual investor put their bet on Bitcoin to reach new highs in 2022?
Bitcoin’s History of Swings on the Market
Anyone that has followed Bitcoin, or any cryptocurrency for that matter, can tell you that it has a long-standing history of having large swings in value at any given moment. That volatility can scare off people from wanting to get into Bitcoin. However, it is that same volatility that others look to exploit to make their profits.
Panic selling is one of the critical factors in some of Bitcoin’s swings in the past. For example, when news comes out about crackdowns on Bitcoin, people get out of Bitcoin, which causes Bitcoin to have a downturn in value. As Bitcoin dips lower in value over panic selling, a group of investors or individuals usually come in and buy that dip, causing the value of Bitcoin to go back up.
Buying the Dip: A Move That Should Be Closely Looked At
For anyone familiar with investment memes, you’ve probably seen the “Buy the dip!” meme at some point online. While buying the dip in Bitcoin can turn out to be profitable, you most likely aren’t the only one that will be doing it. Depending on how big the dip is, you might see whales coming in to buy the Bitcoin dip.
A whale is an investor who invests a significant amount into anything on the market, whether it‘s shares in a company or a cryptocurrency like Bitcoin. The need to look at whales investing in Bitcoin is that they can always pull the rug on the rest of the people invested in Bitcoin. The term “pull the rug” comes from a whale investor selling off a large number of their shares or all of their shares at once, causing the value of the stock or cryptocurrency to fall.
Whale Investors: How They Can Affect Bitcoin
So how and why are whale investors able to affect the value of Bitcoin? It comes down to the amount of Bitcoin they buy at once or sell at once. Movements like this cause people to follow the same moves. When that whale buys a large amount of Bitcoin, the price starts moving upwards, while the opposite happens when the whale sells that same amount of Bitcoin.
Some of the whale investors in Bitcoin are just speculators, meaning they buy-in at the lowest point and sell at the highest to maximize profits. While Bitcoin is a type of currency, investors on Wall Street can buy and sell BItcoin from the stock markets, which affects the value of Bitcoin. They are like the gold speculators from the 20th century that would only invest in gold at its lowest point and sell at the highest.
Will Bitcoin Ever Be A Standard Currency
Bitcoin is decentralized, meaning it isn’t attached to a banking system, making some people question its true worth. People like the idea of fiat money because it’s “backed” by the good faith of their government. But with countries printing fiat money like it’s going out of style, they are devaluing their currency which can lead it to be worthless in the end.
Bitcoin isn’t printed without impunity like fiat money is; the cryptocurrency has to be mined by computer systems. So there can only be as much Bitcoin available that computers can mine. Computers mine Bitcoin by solving a complex equation, with people using their computer systems to compete to see which one can solve the equation first.
The lengths that computer systems have to go through to mine Bitcoin make it rare and burn up a lot of electricity. That has made Bitcoin unpopular with environmentalists, making some countries think twice about Bitcoin with the carbon footprint it leaves. While Bitcoin might not be the standard for these reasons, it could pave the way for another cryptocurrency to take that mantle.
