At the end of last year, Bitcoin boasted new highs that just seem to keep rising. Their all time high of $68,990.90 has been surpassed since November, despite a quick dip due to the uncertainty of the Omicron variant shaking things up.
And yet, now news sources are reporting a sudden and heavy crash, sending Bitcoin back down to below $30,000. What caused such a high in Bitcoin, and what’s causing this crash now? Is it something that can be recovered from? If you’re interested in the chance to buy Bitcoin, take a look at this link to find out more information. But before you go, take a look at our guide to Bitcoin’s fluctuating prices to be sure of when you can make the best investment.
What factors cause price fluctuations?
Like any other valuable asset, be it products, services or currencies, Bitcoin is prey to the almighty supply and demand. That coupled with the fact that, by design, there will only ever be 21 million Bitcoins created, means that the price will go up the more Bitcoins are bought. The demand is there but not the supply. This is the main driving force behind the growing price of Bitcoin, but there is more as to what can affect the price.
The crypto trading sphere is famously very volatile. The market is made up of high highs and low lows. Never is this more apparent than when looking at Bitcoin, which has a long and well documented history. It was one of the first and has established itself as the biggest, and in a world where the biggest is built on hype, Bitcoin has been affected by everything from Tweets by celebrities to government regulations, and even at this very moment, crashing to below $30,000 in May 2022 due to the volatile nature of crypto paired with the financial winter that inevitably occurs has part of the market.
On the other hand, there are bigger, international reasons why Bitcoin has been hitting new highs over the past couple of years.
Coinbase goes public
Cryptocurrency exchange Coinbase Global went public in April 2021, and since then has done great work for the biggest crypto coins on the market, including Bitcoin. Coinbase is the closest that cryptocurrencies have to an authority figure, and it has a big say in what cryptocurrencies are accepted and which are left behind. Considering that there are thousands of them, discerning good coins from bad, takes a lot of the legwork out for investors.
Valued at $100 billion, the direct offering of Coinbase created something of a watershed moment, where investors sprang from all over, ready to buy.
CAR and El Salvador embrace the Bitcoin
Something that might have aided Bitcoin’s meteoric rise was the total embracing of the coin by the El Salvador president, President Bukele, who, in an attempt to sway the rest of the country into taking on Bitcoin, created his own Bitcoin City at the base of the Conchagua volcano.
El Salvador was already the first to make Bitcoin legal tender, which has in turn prompted the Central African Republic to consider the move. And as of April 2022, the bill to legalize Bitcoin alongside the national currency of CFA francs was signed into law by President Faustin Archange Touadera. Neither country has implemented taxes on the cryptocurrencies in an attempt to prosper financial stability.
War in Ukraine
No mention of today’s financial situation goes by without mentioning the war in Ukraine at the moment. Putin really put a wrench into the system, obviously affecting the lives of innocent people, but also every corner of the financial market – even crypto.
Everything is going down. Oil is being cut off, or becoming more expensive, wheat cannot be grown on Ukraine’s land when their farmers are busy fighting a war, resulting in slow economic growth while inflation keeps going up – and Bitcoin is no different. Bitcoin’s rise might have started with the move of Coinbase to go public and CAR and El Salvador embracing the coin, but it stagnated and crashed due to wider world issues.
This isn’t necessarily a bad thing. A dip in the cryptocurrencies means that there are a lot more coins up for grabs for lower prices, which, if the market stabilizes, could be worth a lot in the future.
This is where the problem comes in. You have to be certain that the market will stabilize and be patient enough to wait for it to occur. We don’t know how long this war will last, for example. The jury’s out on what is going to happen to the economy until it’s over.
Bitcoin’s years-long rise in price and value might have deterred some people from investing, however, as mentioned the value is “crashing”. It’s crashing with no flaw in the coin or the market to point to, but merely the closest excuse is that people simply cannot afford it. If you can afford it, and you have done your research and due diligence to assure you that this is a temporary state of affairs and that the market will recover, now is the time to invest.