Bitcoin has been one of the most well-known cryptocurrencies on earth ever since its creation by the mysterious Satoshi Nakamoto in 2008. As of May 8th, 2021, it has been on a 4.18% rise and seems to be rising in the future too. This is exactly the trend with cryptos being unstable and you’d never know when a crash is incoming. April has shown Bitcoin undergoing one of the worst dips ever, where it was down by almost 7.9%. Experts are wondering if another huge crash can be anticipated in the coming months.
Bitcoin has seen a huge surge on May 7th and has seen a lot of volatility since. What does this say about what’s to come in 2021: quite a lot of important things. Crypto markets in general have been up and down by fantastic levels. The Doge run recently has given quite a lot of profits. Altcoins are also showing a steady rise and with more people getting involved in crypto, the entire sector seems to be developing fast. You can keep track of this at bmmagazine.co.uk.
Bitcoin is the parent cryptocurrency almost! Then why is its value at a decline? Here are a few reasons.
1. Relatively primitive technology
Bitcoin is one of the oldest cryptocurrencies that exists and various altcoins have grown and developed since then. Altcoins are derived from the same blockchain technology like Bitcoin and have been improved a lot. Altcoins like ADA process in 10 minutes, LINK in five minutes whereas Bitcoin takes 40 minutes and Bitcoin Cash takes 2 and a half hours!
Also, to environmentally woke people, Bitcoin causes a lot of harmful emissions whereas Ethereum has developed new technology to reduce their emission content.
The shortcomings of Bitcoin are not seen in the altcoins and this is what has led to a dip in Bitcoin’s value. People are now preferring to conduct transactions in the faster processing altcoins.
2. Pandemic effects
Almost all the cryptos have dipped in value or have been extremely volatile during this pandemic. Bitcoin too has had a lag because of the COVID-19 situation. Cryptocurrency is always tagged to the economy of the world. The massive economic drop has caused a similar dip in cryptocurrency prices as people tended to encash the crypto instead.
The economy has been very hard hit with the financial markets crashing because of the global lockdown. So the value of Bitcoin also suffered by reducing from $9,000 to $4,000. Many experts attribute it to a phenomenon called flash crashes as many investors withdrew their money.
3. Rise of Ethereum
Ethereum is popular crypto for sure, second to Bitcoin and also called the Digital Silver. This has been rising slowly but steadily; thanks to its various features, efficient transaction times, and ability to allow trades not limited to cryptocurrency. NFTs are Non-Fungible Tokens and are also rising in popularity as a platform for digital artists and creators. NFTs trade only with Ethereum and that has given a bigger boost to Ethereum. In fact, the creators of Ethereum designed it such that it would overtake Bitcoin someday, and it seems to be doing it now.
Ethereum also has been peaking in value over the last few weeks and its market cap has increased to $322 billion. This is just one-third of the market cap of Bitcoin, so the level of Ethereum’s performance is comparatively higher than Bitcoin’s. This spells higher returns for Ethereum than Bitcoin.
4. Bitcoin Halving
Bitcoin Halving or Halving is done to have some regulation on the flow of Bitcoin tokens and make it more scalable. This has occurred at the beginning of May and may affect the prices in the near future. The highest supply of tokens of Bitcoin is capitalized at 21 million and the halving is scheduled to happen after 210,000 blocks. This slows Bitcoin token generation and can set its process back by a lot of time. This makes people not use it and thus its value reduces.
5. Biden’s taxation
Canada has gotten approval for Ethereum and Bitcoin usage within the country but America’s approval has been pending for a long time. Biden’s government wants to increase the tax on the gains to 39.6% for the richer clientele. This led to a large decrease in US stocks as people were missing out on all the returns the stocks and crypto gave them. In fact, there is another tax if they sold the crypto that has been in their portfolio for more than a year.
Hence, many real-time investors have opted out of investing in Bitcoin recently, leading to more plunges in the price of Bitcoin. While Biden’s government is more open towards cryptocurrency and is trying to make it more popular, considering his campaign was funded by the CEO of a cryptocurrency exchange firm, taxation seems counter-productive.
6. High volatility predictions
Many people have taken to saying that Bitcoin should be called shitcoin; thanks to the whole big bubble it is in right now. The above-mentioned factors have made the prices of Bitcoin highly unpredictable. The fact that it is unstable makes more people liquidate their money leading to further crashes. People are looking for alternatives or just biding time until the government passes a less strict taxation rate on crypto. This can only bring down Bitcoin’s popularity and lead it closer to a crash.
Cryptocurrency has always been known for its instability. It is an upcoming sector and many people are rushing into it pell-mell for the immediate returns, but cryptocurrency is actually all about long-term returns. People who’ve traded in Bitcoin in 2017, have an almost 700% return guaranteed.
This actually is the long-term effect of crypto, the booms are gotten back after years. With the upcoming predicted crash of Bitcoin, do not expect immediate returns now. Bitcoin has been the gold standard for cryptocurrency, so if you want to stick to Bitcoin for investment, you can. An immense rise in prices can only be probably seen in 2022 or 2023. The chances of Bitcoin crashing seem moderate now but it is going to be inevitable.