May 12th saw Bitcoin drop to $25 402, matching it December 2020 price levels. Some time after that, it rebounded to $29 000. The cryptocurrency is less than 50 percent what it was in the fall season of 2021, leading to experts’ drastic prognosis of an upcoming “crypto winter” that will see the digital asset and the industry as a whole at a very unstable position.
Here are the major reasons for Bitcoin’s unreliable pricing, not one of which takes precedent over the other.
Bitcoin is heavily reliant on geopolitical events, proving that once and for all the digital asset is not as independent as once though. Major world events such as the COVID outbreak, the Russian invasion of the Ukraine, and the resulting inflation has led major banking institutions to increase their interest rates, which directly affects investors many of whom hold large quantities of crypto including Bitcoin.
Regulations play a huge role in the current state of the crypto market. When regulators crack down on crypto operations – in order to conserve the integrity of online markets as well as to avoid fraudulent activities – they are essentially devaluing cryptocurrencies, especially Bitcoin. All these assets are decentralized, and so their value is derived out of the amount of exchange the public undertakes with them; the more a government limits crypt0 transactions, the less people will use said crypto asset, resulting in price dips, as when China banned crypto mining, leading to a Bitcoin valuation plunge from $65 000 in April to $35 000 in June. And still, governments around the world are worried that the current regulations are not nearly enough.
Crypto-related scams are a huge underground gold mine, but it will begin to backfire sooner or later, because with the increase of scams so do the number of people losing interest in crypto arises, resulting in less Buying potential for the digital asset.
Another major factor to consider are Stablecoins, that rely on BTC reserves to sustain their fiat currency attachments, since most Stablecoins attempt to peg their value to external assets, the most popular one being the US dollar. When a Stablecoin startup or firm crashes, their BTC are up for grabs putting pressure on the pricing. Or, when a Stablecoins organization grows, it’s only logical that their BTC supply goes up with it, so that too would alter in some way the overall BTC price.
Consider also the so-called BTC whales that move huge amounts of the stuff from one wallet to another, essentially shifting market prices as they do so.
Experts recommend due diligence when dealing with crypto. Never invest more than you can lose, and keep in mind that the crypto market is not all Bitcoin, although it, for now, is its prime mover.
