The largest cryptocurrency in the world, Bitcoin (BTC) is trading under immense pressure. One Bitcoin is now worth around $17,000, which was almost worth around $69,000 in November 2021. Since then, Bitcoin has been on a downward trajectory and now it almost looks impossible that it will ever recover back to the heights that it witnessed long back in 2021.
So what should you do if you are currently invested in Bitcoin? Should you run a mile or have high hopes that Bitcoin will bounce back soon to its highest levels soon. Through this detailed read, we explain why Bitcoin is crashing today and what does the Bitcoin fall mean for crypto investors.
What Is Happening to Bitcoin?
2022 has been a tumultuous year for the king of cryptocurrency, Bitcoin (BTC). Bitcoin, which touched its peak in November, 2021 and shot past $69,000 levels, is now even struggling to stick around $18,000. Post the aftermath of FTX downfall, Bitcoin is not able to cope up with the market pressure and thus showing no real signs of recovery.
Overall, the cryptocurrency market has shown a downward trend and has been extremely volatile since the collapse of FTX, one of the largest global crypto exchanges. Apart from the FTX meltdown, the rising interest rates and inflation fears have also played a huge role in keeping the crypto prices lower.
Post the deadly November crash, Bitcoin is hovering around in the range of $16,000-$18,000 levels. BTC has marked an almost 80% decrease in value since it reached its all-time high in November 2021. It also crossed $18,000 levels on December 15, 2022, but this price point only lasted for a brief time and then it again slid back to below $18,000. Experts believe that Bitcoin is about to hit its bottom soon, however, others feel that there is more downtrend on the way.
Here’s how BTC’s current price has slumped from its high point over the past one year:
Reason Behind The Bitcoin Drop in 2022
Bitcoin, which started 2022 with a positive note, might have seen again its peak by the end of 2022, but certain unfortunate events brought too many swings in the price of BTC, which made BTC crash from $50,000 levels to $15,000 levels, over the past one year.
Recent price fluctuations in Bitcoin and in the overall crypto market has been due to poor macroeconomic headwinds and the recent bankruptcies in the crypto world. Bitcoin has gone into a downfall as a result of:
- Russia-Ukraine war.
- Rising inflationary fears which means more expenses on cost of living.
- Uncertainty due to rising interest rates in the U.S. and U.K.
- China making cryptocurrency transactions illegal.
- New tax regime system in India.
- Terra-Luna crash.
- Lastly, the collapse of the largest global cryptocurrency exchange FTX.
The drop in prices of Bitcoin in 2022 was triggered by the above-mentioned reasons. Such unexpected and unfortunate back to back events not only prompted severe sell-offs and panic selling in markets, but also have played a major role in upsetting the investor’s mood.
What Does Bitcoin Fall Mean For Crypto Investors?
Bitcoin, which is one of the most preferred cryptocurrencies among the huge lot, has been also touted as an alternative to gold—which means it could prove itself as a hedge against inflation. Similarly, Bitcoin is the only cryptocurrency which has been widely accepted as the legitimate payment mode just like fiat currencies but certainly these corporations are very few in number.
Those who invest in Bitcoin know very well that digital assets are extremely volatile in nature and are bound to fluctuate even in the span of 24 hours. This means that even Bitcoin’s price is purely based on speculation among investors about whether it will rise or fall in future. Investors believe very firmly that as quickly as Bitcoin prices drop, it could just as quickly climb up again.
Market experts have full confidence that given its volatile nature, it is possible that one day Bitcoin will again gather momentum and show a price rally at some point in the future, which may be weeks, months or even years down the line. Supporters of Bitcoin see it as a beneficial investment avenue which helps in diversifying the overall portfolio and could give massive returns anytime than any other form of investment. However, before investing in Bitcoin one must be aware of the basics that may help them make a wise financial decision.
Tips To Consider Before Investing In Bitcoin
- Do not invest all your life savings. It is advisable to invest only 5% to 10% of your overall portfolio into cryptocurrencies such as Bitcoin.
- Invest that part of money which you can afford to lose.
- Like other traditional assets, treat cryptocurrency as a long-term investment.
- Understand the volatility nature of Bitcoin and then take a call to invest.
- Research thoroughly on the best time to buy or sell Bitcoin to maximize returns.
One thing is very sure that Bitcoin is unstable and volatile, with a record of “boom and bust“ cycles that have left many pondering whether it is safe to invest or not. It is not also regulated as any other form of conventional investment product such as equities or mutual funds. Moreover, Bitcoin does not have its own intrinsic value and it is entirely based on mere speculation.
That’s why, never hesitate to consult a financial planner who can guide you about how much and which cryptocurrency fits into your investment strategy as per your financial goals.
Step-by-Step Guide On How To Buy Bitcoin In India?
Once you are very sure about investing in Bitcoin, check these below-mentioned steps on how to purchase Bitcoin in India:
- Step 1: Create a free account by logging in any of the selected crypto exchanges via their website or app.
- Step 2: Register via app or website and verify your identification.
- Step 3: Click on the “buy” tab which is generally associated with the available cryptocurrencies’ options. For example, ABC exchange will have XYZ number of cryptocurrencies including Bitcoin, which will have a buy link attached with the name of the cryptocurrency.
- Step 4: Buy Bitcoin by selecting any of the payment modes such as credit/debit cards, net banking transfers or via peer-to-peer (P2P) trading options and adding funds in the form of your fiat currencies such as INR.
- Step 5: Once you have bought the Bitcoin against the payment made in fiat currencies, you can store your Bitcoins in either your personal digital wallet, or simply hold it in the exchange’s account. You can also sell your crypto anytime or trade for other crypto or stake it to earn passive income.
What Is India’s Stance On Bitcoin And Other Cryptocurrencies?
The government of India has been fervently opposing cryptocurrencies such as Bitcoin and their adoption as a legitimate source of funds from day one. The Reserve Bank of India,(RBI), has clearly stated a number of perils and risks associated with Bitcoin and the overall ecosystem of cryptocurrency markets such as concerns related to financial instability, non-transparency and issues related to illegitimate funding among others. In fact, RBI has strictly recommended regulating the crypto sector by bringing a law.
In Budget 2022, the Finance Minister of India, Ms. Nirmala Sitharaman has even labeled cryptocurrencies as “digital assets” and not “currency”. To wean-off cryptocurrencies’ demand, the government also brought it under a strict tax regime, levying heavy taxes on income generated from crypto transactions as high as 30%. Moreover, the government has also levied 1% tax deducted at source (TDS) on payments linked to such transactions, which came into effect on July 1, 2022.
In a circular dated February, 2022, RBI stated clearly that“cryptocurrencies are not amenable to definition as a currency, asset or commodity; they have no underlying cash flows, they have no intrinsic value; that they are akin to Ponzi schemes, and may even be worse. These should be reason enough to keep them away from the formal financial system.”
Post the aftermath caused by the FTX fallout, the world is talking aloud about bringing digital assets such as Bitcoin under proper legislatory framework and regulatory scanner. It will not be wrong to say that because of India’s tough stance on cryptocurrencies, the government of India has been able to protect investors from a massive crypto global meltdown.
Bitcoin prices are dropping today, but one never knows what is stored in the future. So, if you have decided to invest or hold your position in Bitcoin, be also prepared for a bumpy ride. Do your due diligence and do not just stick to one cryptocurrency. Wisely spread your hard-earned money around and thus spread the risk. Invest that amount in Bitcoin, which you can afford to lose.