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For the past couple of months, the cryptocurrency industry has gained a lot of traction. Thanks to the contributions of some well known institutional investors who poured in billions of dollars to the digital asset industry mainly Bitcoin.
But for normal retail investors there is a lot of concern over their investment in Bitcoin, Ethereum and other digital assets which at times are highly volatile. Here we put our views on the most appropriate 5 reasons that you might think before entering the roller coster ride.
Bitcoin is recognised as a currency by the SEC and most of the regulatory bodies across the world. Currencies are regarded as a store of value and transfer of value which bitcoin does for sure. Do you buy dollar for investment ? Dollar's value is determined by the debt, supply, demand for the currency in the market. The demand for bitcoin in the market is for sure going to be there, but the value is hard to predict & there is little room for analysis.
The RSI (Relative Strength Index) which is a fundamental indicator to analyse the supply-demand ratio of the market indicates that the market is over bought for Bitcoin. 1 month RSI and 1 day RSI values for BTC/USDT pairs are above 85 which indicates that the asset is in over-bought condition. So investors can wait for a correction to enter the market at low levels.
For our reference, Bitcoin's price while writing this article was around $28,000 and this means even for 300% return from now it needs Bitcoin to reach $112,000. This is highly undesirable in near term as the market should enter into a correction phase after the bull run before breaking into unimaginable highs. Also assets like Zilliqa (ZIL), Stellar (XLM) gives four digit returns compared to bitcoin and are less costly for retail investors.
The valuation of a stock is based on a variety of factors which doesn't fit to bitcoin. Bitcoin is unique by its nature. It's price is impacted by the mining output, miner's motive to hodl or sell them, electricity price, hardware costs which are completely irrelevant to the stock market. So for new investors looking to buy bitcoin, understand the basics of the market before entering.
Comparing with assets like Ethereum, Tron, EOS & Tether, Bitcoin is widely limited by its ability to act on real life usecases to a greater extend. Until there is a real life adoption of bitcoin, the bull run will be based on supply/demand which is highly unpredictable in current scenario.
So if you're looking to invest in bitcoin at these levels, make sure you do fundamental analysis of the market and understand the nature of Bitcoin . Bitcoin is one of the greatest investment of the decade, but this article is focussed on maximising returns for retail investors.
Disclaimer : The article is the views of the article is not linked / promoted / paid by anyone . It is not an advice to invest in cryptocurrencies or any digital assets. Please check your personal financial advisor and legal advisor before dealing with such assets. Cryptocurrency investments are subjected to high market risks and are volatile.