Is investing all about timing the market? Perhaps this isn’t the case for the stock market, but it sure seems to be the case for the crypto market.
Most investors and traders concern themselves with long-term investments. These are usually investments that companies or individuals can hold for more than a couple of years (depending on the performance of the stock). This type of investment works because there’s an assumption that the capital will appreciate over time. Therefore, it’s critical for you to study market trends and historical data before locking in your purchase.
Market timing, on the other hand, is a bit more spontaneous and high-risk. This is mainly seen in cryptocurrency investments due to its volatility. But that means the returns can be much larger as well. This isn’t to say that there’s no analysis involved in this technique—the right timing can be deduced by looking at past data too.
Take Bitcoin, for example. Its prices have ballooned since its inception and public introduction ten years ago. What if you purchased $10 worth of Bitcoin back then? Let’s take a look at what would’ve happened.
What did Bitcoin prices look like over the years?
Would you believe that one Bitcoin was only worth $0.5 back in July 2010? This means that if you bought $10 worth of Bitcoin then, it would amount to 202 BTC today, or approximately $1,612,335.1. Yep, you would be a millionaire!
Source: CoinDesk as of May 22, 2019
Bitcoin has gone through some major ups and downs in the last ten years. Here are the most prominent price fluctuations (USD):
- 2011 – Bitcoin was slowly making itself known and already displayed higher spikes in prices due to the curiosity of both public and private consumers. In June 2011, BTC prices reached a high of $31.91, up from 5 cents a piece in 2010. However, prices dropped back down to $4.62 in December 2011.
- 2012 – The currency was showing a steady upwards incline. Rates were around the $13.5 mark, and a $10 investment would have translated to $450.33. But only a few businesses were accepting Bitcoin as payment at this point.
- 2013 – This year was huge in the Bitcoin industry, as security issues and scams were at the center stage of cryptocurrency news. However, when the Chinese company Baidu started to accept the altcoin as “real money,” the price shot up to a high of $1,147.25. At the end of the year, prices closed at $757.50.
- 2014 – More companies started to adopt Bitcoin. However, prices continued to plummet until the end of the year. Prices closed at $309.87.
- 2015 – Prices mostly continued at the $300 range, but the year ended strong with $413.51 per coin.
- 2016 – Once again, with the influence of Chinese companies, Bitcoin prices spiked and reached the $700 mark. The decreased demand later on in the year made prices close at $638.22.
- 2017 – This was a rollercoaster of a year for Bitcoin! In February, it broke its 2013 record and went on to have a value of $1169.04. With a steady upwards pace, it crossed the $10,000 mark in November and hit an all-time high of $19,783 at the end of the year. Along with several investors and cryptocurrencies being pointed as the cause of this spike, there was also speculation that this was caused by market manipulation.
- 2018 – The rapid price hike was also quick to drop, and in February, Bitcoin amounted to $10,074. Still high compared to its history but had an almost 50% price drop in a matter of months. It continued to plummet to $6,166 at the end of the year.
- 2019 – Bitcoin is continuing to experience a mostly bullish trend for the year and currently amounts to almost $8,000.
Why is Bitcoin (and other cryptocurrencies) so volatile?
Bitcoin prices have been known to fluctuate over the years. Why is this the case? It turns out there are logical reasons as to why the market is volatile.
News can affect the adoption rate
Blockchain technology is still relatively new to the market, and with such a short history, many people are still unsure about how secure it is. Is owning digital currency any safer than Fiat? Will your assets be easily hacked? Then, there’s also news of governments regulating Bitcoin and accepting it as a currency for payments for different goods and services. These bits of good and bad news affect the adoption rate of the coin, and therefore either scare or entice investors, affecting prices as a result.
The future of cryptocurrency is unsure
Who knows what will happen to altcoins in another ten years? They could keep growing, or crash altogether, and the latter is the fear lording over hesitant investors. The general question is, “Why would you put your money on something so risky when there are plenty of other (more sustainable) avenues you can earn from?”
High risk, high reward system instills fear
Some investors like to gamble on such huge stakes, others don’t. While there have been stories of successful cryptocurrency investors who grew their money in a short period, there were many others who were negatively affected by unexpected price crashes. Some don’t like the instability, which again affects the demand and supply that are factored in pricing.
Is it too late to invest in Bitcoin today?
While the price of Bitcoin now is not as low as it was before, it’s probably not a bad idea to still take a shot at investing in it. As of writing, there are only about 17.7 million BTC mined out of 21 million, with an estimated 1,800 BTC mined every day. However, mining isn’t as simple as this as you think.
In an analysis by CryptoCoin Mastery, the Bitcoin reward from mining blocks was previously at 50 coins, and it’s dropped in halves every four years all the way now to 12.5 BTC. In 2020, it’ll drop to 6.25 BTC. At this rate, all Bitcoin should have been mined by the year 2140.
That said, you’re not limited to investing in Bitcoin alone. The crypto business is booming, and other coins such as Ethereum (ETH), Ripple (XRP), and Litecoin (LTC) are topping the charts for promising altcoins you can invest in. As they say, don’t put all your eggs in one basket.
The key to taking the first step in investing is finding a crypto exchange that you can trust. BXB Exchange offers a smooth user experience and a reliable platform right at your fingertips. Sign up today and begin your investment journey!