After Bitcoin hits another lifetime high, an analysis of what lies ahead?
As bitcoin price hit a new life-time high of $66,974 after US launched first bitcoin-linked ETF, crypto investors are euphoric with the rise but anxious with perpetual volatility at the same time
PremiumAny historic rise in the price of bitcoin seems exorbitant, but only till the time a newer record breaks the previous one. The big daddy of cryptocurrencies again hit an all-time high, this time at $66,974 on Wednesday. This happened after the landmark launch of the first bitcoin linked ETF in the US.
The earlier life-time high of $64,888 happened in April. Strangely, it fell nearly 50 percent in the month of July on account of the changed stance of Tesla and strict regulations imposed by China on its financial institutions. However, the decline was short-lived and the bitcoin prices soon recovered to jump again.
The road ahead
With easy availability of bitcoins on a number of crypto exchanges such as WazirX, CoinSwitch Kuber, CoinDCX and Unocoin, investors are increasingly investing in bitcoins the way they trade stocks and bonds.
The price trends of bitcoins clearly indicate that the leading cryptocurrency is hyper volatile and investors should not consider any price range as something which is “here to say". After having seen its extreme volatility, even the ardent bitcoin followers refrain from believing that its prices would move only upward in the long run.
Some of the sceptics, however, continue to warn the investors against going with the flow. For instance, Bank of England’s deputy governor for financial stability Jon Cunliffe warns that bitcoins don’t have an intrinsic value, so the massive collapse of these unbacked assets to zero is a “plausible scenario". John Paulson, one of the known hedge-fund managers, who in 2007 predicted the subprime crisis believes that cryptocurrencies will be “worthless".
So, even if the investors don’t believe the bitcoin sceptics, they are advised to invest with caution. The total allocation of cryptocurrencies should stay small so that it doesn't dominate your entire portfolio. Theresa Morrison, co-founder of Beckett Collective was quoted in Time.com as saying that the crypto allocation in the overall portfolio should be low so that ‘crypto tail doesn’t wag your investment dog.’
Explore beyond bitcoins
One way to curb the effect of bitcoin’s volatility is to think beyond crypto assets, while another alternative is to explore other alternatives among the digital currencies.
It’s because of bitcoin’s growing price that other lesser known currencies such as meme coins garnered huge interest from investors, helping these currencies surge — some of which rose by as much as 1,200 percent in merely two months, as reported by Mint.
Kristin Boggiano, Co-founder & President, CrossTower, a digital-assets exchange also shares similar sentiments. “As Bitcoin's price approaches all-time highs, meme coins are rising on renewed interest in crypto more broadly," she says.
As we summarise, we can highlight that bitcoin’s price is extremely volatile and one is advised to tread the cryptocurrency journey with caution.
One can keep a portion of total portfolio to crypto assets and can diversify investments across digital currencies — bitcoin being one of them.
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