Everyone interested in investing is aware of the 2022 stock market decline. Cryptocurrencies, in particular, have suffered a defeating blow, with the entire market losing over $2 trillion in value in just a few months. As we are experiencing a crypto winter, a burning question keeps popping up: Should you buy Bitcoin in 2022?
In this article, we’ll explain why Bitcoin has lost so much of its value, what that means for potential investors, and whether buying this digital asset can represent a viable financial investment in 2022.
Why are Cryptocurrencies losing their value?
Before we discuss the future prospects of Bitcoin, we need to understand the underlying reasons why cryptocurrencies are experiencing a decline. Although it’s impossible to predict the future, being informed of the past is certain to push you in the right direction and help you make the right decision.
Although the crypto market is making headlines, keep in mind that the entire stock market is experiencing a downfall. The MSCI All Country World Index officially reached bear territory in June 2022, falling over 20% from November 2021. Similarly, the S&P 500 fell over 23% from its January peak.
Events that led to the stock market decline
Unsurprisingly, numerous global events led to the situation we find ourselves in. It began as the pandemic hit in 2020, causing a global recession and a supply chain crisis. Tensions in Eastern Europe have also caused an energy crisis, affecting gas prices worldwide.
Consequently, we are experiencing an inflation surge. To combat inflation, the United States Federal Reserve Systems raised interest rates. In simple terms, high interest rates reduce a company’s spending ability, decreasing its stock value as a result.
Now you may be wondering, what does this have to do with Bitcoin? After all, cryptocurrencies are digital and decentralized, which should make them somewhat immune to certain global troubles, like supply chain issues, right? That may be true, but there is still a correlation between the global stock market and the crypto industry.
Crypto market decline
The answer to the crypto winter is simple – many investors find crypto to be too much of a risk to hold during an economic crisis. Cryptocurrencies are notoriously volatile, which means that their value can change quickly and unpredictably. As a result, risk-averse investors are selling their crypto holdings in search of safer options.
The consequences of the stock market decline have been devastating for crypto. Bitcoin reached its highest ever value of over $69,000 in November 2021 but dropped to just $35,000 by January. After falling below $20,000, the value of 1 BTC is currently hovering around $24000.
Unfortunately, Bitcoin isn’t the only currency that has had a terrible year. Ether (ETH) followed a similar pattern, losing over 60% of its highest value. Some stablecoins have been depegged from the USD, most notably TerraUSD, which is currently worth only $0.03, further decreasing the investors’ confidence.
Why you Should Buy Bitcoin in 2022?
Now that we’ve discussed the current economic situation, let’s try to answer the crucial question – why should you even buy Bitcoin in such an unpredictable climate? Let’s get the obvious answer out of the way – a common strategy is to buy low and sell high. Relatively speaking, Bitcoin is currently at the low end of its value.
On top of that, keep in mind that there is still a high demand for web3 – a new, decentralized internet. Although it may not be a priority for most investors at the moment, once we globally recover from an economic recession, web3 will undoubtedly revolutionize the way we use the internet. Cryptocurrencies are the core of web3, and Bitcoin remains the most popular and secure digital coin in the world.
Finally, you may have heard of DeFi, aka Decentralized Finance. Although it’s still in its infancy, many believe that DeFi represents the future of our economy, powered by blockchain technologies. Numerous, exciting crypto projects will launch in the future – and Bitcoin lies at the core of most of them.
Bitcoin Price Prediction 2022
Experts predict that the digital currency could reach $100,000 by the end of the year, despite the crypto winter. Some particularly optimistic analysts predict that the value of Bitcoin could be in the millions by the end of the decade. Most agree that Bitcoin has not peaked yet and is currently experiencing a phase of high volatility, with a strong increase in value long-term.
While there’s no guarantee that the price of Bitcoin won’t fall any lower, experts agree that this is not the end of crypto. Keep in mind that this isn’t the first time that Bitcoin has lost most of its value, but it has always gained it all back. As the industry rebuilds, those who were brave enough to buy at the height of unpredictability can expect a huge return on their investment.
Should you Trade Bitcoin in 2022?
As mentioned, cryptocurrencies are notorious for being volatile. After the decline of 2022, it’s even worse, and predicting how Bitcoin will behave in the short-term has proven to be a Herculean task. Although the entire year has been a huge headache for investors, a certain part of the population can benefit highly from it – traders.
Unlike investors, traders love it when an asset is volatile, as it allows them to gain huge profits in a short period. As you can imagine, trading is even riskier than investing, since it requires a vast knowledge of how the market behaves at any given moment. On top of that, even the best traders make mistakes, and short-trading in particular requires a decent risk tolerance to make up for a bad trade.
As a result, we only recommend short-term trading to experienced and highly knowledgeable individuals. If you want to ride the waves and capitalize on the crypto crisis, make sure to do your research and utilize all the tools available before taking the plunge.
Conclusion
To sum up, the entire stock market is experiencing a big downfall, and crypto is following suit. Many investors are baffled trying to figure out how to preserve their investments. As a result, people are looking for more secure assets to buy, leaving Bitcoin open for others at a huge discount.
Although it may sound counter-intuitive, buying Bitcoin in 2022 may offer a huge return on your investment. Despite the recent events, blockchain technologies remain one of the most exciting innovation of the century. There is no doubt that we are experiencing a digital revolution, and a few bumps on the road are to be expected.
Nonetheless, financial analysts agree that Bitcoin is yet to flourish, and buying Bitcoin in 2022 could be the best financial decision you’ll ever make. If you don’t want to wait years to see an ROI, consider using this opportunity to short-trade and make the best out of a volatile period. Happy trading!
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