Here’s something for everyone who has heard the word Bitcoin and for those who haven’t. Are you one of the HOLDers (holders) of Bitcoin questioning yourself on why you are holding on despite the Bitcoin price drop? If yes, then this is mainly for you. Even if you are just intrigued and wondering if this is a good time to invest, here’s some food for thought from those confidently holding on.
Bitcoin, the world’s oldest crypto asset, has always held the top spot for market capitalisation. As of now, it stands at USD 700 billion (~₹530 crores). Today, Bitcoin can pay for a drink in El Salvador, the first country to recognise Bitcoin as legal tender. Amid the recent Bitcoin price drop, Bitcoin keeps maintaining the bullish sentiment around itself.
There are quite a few reasons why the bullish sentiment prevails despite the Bitcoin price drop and crypto uncertainty in general. Let us look at the key ones.
The Crypto Wave is a Far-Reaching One
When the pandemic began and the employment market started shrinking, people started innovating with sources of income. This turned out well for Bitcoin. Does that mean that the trend will fade? Is the Bitcoin price drop a sign that it was nothing but a trend? Not really. Enthusiasts believe that the reopening of businesses and the rise of demand only boost the demand for crypto, despite the Bitcoin price drop.
The demand for Bitcoin and other crypto-assets has been shooting up in the small towns of India. Today, we rank second in the crypto adoption rate in the world. Most of these new investors are millennials looking to move beyond the traditional avenues of fixed deposits and explore even beyond mutual funds and stocks, and the Bitcoin price drop is not going to dampen their spirits.
Let’s Go Back to School
The basic economic principle of “higher the demand, lower the supply, and higher the price” must be evoked in case of the current Bitcoin price drop. There is a limited amount of Bitcoins available in the market. Every four years, Bitcoin rewards are halved due to mining of a valid Bitcoin block by miners. This brings considerable pressure from the demand side for Bitcoin, which indicates a rise from the Bitcoin price drop.
“Store of Value” Theory
Certain assets either remain the same in value or increase over time. Gold, real estate, art are some examples. These are called stores of value. Bitcoin is globally accepted as a store of value, with some predicting that its market cap will be at par with gold by 2030. The Bitcoin price drop? Just another bad weather day.
The Magic of Crypto On-Chain Analysis
Crypto investors have come up with brilliant ways of market analysis. Crypto on-chain analysis is one such emerging technique.
But, what is on-chain analysis?
Crypto on-chain analysis examines the fundamentals, utility, and transaction activity of a crypto asset along with its blockchain data. In easier terms, it attempts to improve your understanding of a network and predicts price movements through analysis of certain metrics. These include transaction volumes, price correlations, block details, exchange inflows, outflows, etc.
With Bitcoin on-chain analysis, you can study miner activity and user adoption to check whether the market price is justified. It is similar to the fundamental analysis of equities. Pair Bitcoin on-chain analysis with technical analysis and you can time your entry and exit points better.
With the help of such analysis, fans of the currency have been predicting good returns in the long run despite the Bitcoin price drop.
A Golden Cross & The Hash Ribbon & The Bitcoin Rise
You have heard about the Bitcoin price drop, but have you heard of the Golden Cross or the Hash Ribbon? When an asset’s short-term moving average price exceeds its long-term moving average price, it is called a Golden Cross.
In September 2021, this happened in the case of Bitcoin, along with another Bitcoin phenomenon, the Hash Ribbon. Hash Ribbon is basically a measure of the computing power used in the Bitcoin network at a given time. So back in September 2021, both of these occurred together, where there was a cross between Bitcoin’s 30-day moving average and 60-day moving average.
Typically, this means a considerable spike in trading volumes. In the past, whenever the Hash Ribbon has gone up, Bitcoin prices have gone up too. This is a strong factor for bullish investors today to stay put in spite of the Bitcoin price drop.
You Probably Didn’t Know This, But…
You can now run non-fungible tokens (NFTs), smart contracts, and decentralised applications (DApps) on Bitcoin. Smart contracts are enabled by a sidechain-based settlement network enabling privacy and faster Bitcoin transactions. NFTs are a new rage, and there seems to be no stopping them. You can learn about them from some of your favourite artists ranging from Mike Shinoda to Paris Hilton as well.
Hence, there is way more to learn before you begin making conclusions based on the Bitcoin price drop.
You Probably Didn’t Know This Either
There are many crypto assets in the world that can only be bought with Bitcoin. Trading pairs or cryptos that are traded for each other usually use an exchange such as Bitcoin or Ether. This will maintain the importance of Bitcoin in the crypto world for the time to come, whereas the Bitcoin price drop seems like just another day in the rain.
To sum it up, there is a bigger picture and a zoomed-in picture of the world of Bitcoin. You need to look at not just trends but also long-term indicators, fundamentals, technicals, and market movements in the long run while analysing.
Before you decide to enter or exit the wild, wild world of Bitcoin-based only on the Bitcoin price drop, you ought to perform detailed research and weigh the pros and cons. This will now help you make an informed decision.
For more insights and scoop on the Bitcoin price drop and other happenings in the crypto world, keep watching this space on Zebpay. With us, you can also buy Bitcoin and sell, other cryptos in minutes and a lot more. Happy investing!