Bitcoin has certainly captured the eyes and ears of a lot of investors in the last couple of years. But this upward trend wasn’t smooth sailing. There have been a lot of periods where there were intense bouts of volatility in the price hikes. Through these intense ups and downs, these kinds of fluctuations over time are an important reminder that these kinds of investments do inherit a deep level of risk and it is in fact not for everyone.
In this case, it is only logical that adopting a strategic approach, one that focuses on patience and caution will help lead you to a more desired and, if done right, long-term positive effect.
The ever changing Bitcoin price in general will, and always have been, moving regularly in and out of the news and the current events. Whether or not the fluctuations in its price is positive or negative, Bitcoin is always in the headlines. This is mainly due to the fact that a lot of the news outlets would usually frown upon its level of volatility. They sensationalize the level of seriousness of its risks hoping that one day, they will be able to prove their point that Bitcoin will disappear and the investors will have a loss so great that this will all be for nothing.
The fact remains however that Bitcoin really is an asset that’s definitely volatile. But getting intimidated early on in this stage is a fatal mistake. Just because there is indeed a pronounced level of instability or volatility, doesn’t mean that it isn’t an investable asset.
For aspiring Bitcoin investors such as yourself, know that when you do commit to this sort of investments that you will need to take a deep dive into this with an open mind. Expect all the unexpected. Volatile changes are part of the game. And riding the wave is an acquired skill.
One of the biggest mistakes newbies make when getting into cryptocurrency is changing their minds and wanting to pull out whenever prices of Bitcoin drops. Below, we will discover that there are in fact ways on how to adapt to these sudden dips.
Why is Bitcoin Volatile anyway?
In order to fully understand how to even adapt to the ever changing climate and behavior patterns of Bitcoin’s price movements, we should first try to understand why this all happens in the first place. And this isn’t just for kicks. This point is most definitely a necessity if you want to venture out into the unstable ride that is the world of cryptocurrency.
Bitcoin is designed with a sort of fixed supply. This currency is capped at only 21 million coins. This trait makes the entire thing a deflationary asset. As a result this leads to massive price swings and demand changes over time.
Another possible reason for chaos in price spikes is that whenever the world experiences times of economic uncertainty, these things often lead to price surges. Conversely, whenever there is lower demand, these can immediately result in price declines.
Patience and Caution
While at times, Bitcoin might seem like it has predictable cycles, its volatility is the specific reason why you should use caution when investing in Bitcoin. Strategies should be reviewed more than twice. This is because there’s really no one way to exactly know when or even how much value will Bitcoin have or don’t have.
We can never predict the short-term changes with their price, however, what we can do is take a look at its historical data for the long-term. You will be able to see all of these and study them on Bitcoin’s price and analysis patterns.
A quick search online will tell you that from the start of March of 2011st up until March of 2021st, the value of Bitcoin jumped up to 230%. But then you will also see significant dips and losses within that same span of 10 years. Think about it, if the investors sold all their investments during these low times, they would have sealed their fate and locked in their losses. They would have missed out on immensely significant gains that were only realized after that whole decade. This is a clear example of the importance of taking more of a long-range / long-term view if you decide on investing with Bitcoin.
Essentially, one should never try to predict the cycles of changes day to day. This just leads to overthinking and in the end, overshooting. You might end up selling too early when you’ve scared yourself. Long-term views will help you see the bigger picture so to speak. Whenever the price is down, keep in mind to hold on to your crypto, relax and try to just ride it out. This will at least, ensure a potential for gains in the future.