The popularity of bitcoin can be described as being speculative, popular and hallucinogenic over the last decade. It has risen and fallen several times which have caused some disturbances in the financial markets and the populations perception about the cryptocurrencies. Being the world’s first and the most popular digital currency, Bitcoin has established a basis for the rest of the industry. However, currently the cryptocurrency market is in constant development and depending onthe speculation whether the hype surrounding Bitcoin as an unsteady coin which fluctuated greatly is now over or whether further fluctuations are expected. In this article, we will attempt to identify some trends in the market place and make some guess as to whether or not the uncertainties of Bitcoin are going to be a continuing problem or whether stability is around the corner.
Market Trends and Predictions
Regarding the last years, the cryptocurrency market has started to mature and public, attracting a huge interest of institutional investors, corporations and even classic financial companies. Bitcoin has risen massively to $60,000 in April 2021 due to the higher demand for cryptocurrencies because of the corporation’s adoption of bitcoin and unprecedented influx of funds provided as a speculative instrument. Yet, after a few months of the approximate price stabilization, Bitcoin flew down below $6000, which caused some analysts and experts to doubt the viability of the brand new market.
Several market conditions have affected Bitcoin over a while now, ranging from higher bullish, bearish traditional financial markets. For example, the strong positive relationship between Bitcoin and traditional financial markets was observed during the pandemic and this led to a reaction As such, some investors tend to use Bitcoin as a safe haven asset like gold. However, as the traditional markets started to stabilize and expand, peoples’ perception of Bitcoin as a safe-haven asset start to fade, and its price dropped.
Legal structures governing the coin in different jurisdictions is the other key reason influencing Bitcoin’s price swings. Since Bitcoin is still a relatively new asset class, the shifting environment that governs cryptocurrencies has been the main driver of this roller coaster of value. For example, in China, in 2021, expanded its crackdown to outlaw cryptocurrencies and it generates a negative shock to Bitcoin returns. Secondly, the rise in the awareness of users about cryptocurrency exchanges, and the safety of the coins, have caused high fluctuations in the prices.
There is also one more emerging trend, which concerns the use of Bitcoin, and other cryptocurrencies, by large companies. Incorporated entities such as Tesla, Square, and MicroStrategy have bought significant volumes of Bitcoin thus strengthening its perception as an asset class. Institutional buying has been another key driver to the Bitcoin value as investors are now demanding the cryptocurrency beyond the initial hype. Though, the issue regarding the rhythm and time at which various institutions accept Bitcoin might still result in fluctuations in Bitcoin markets.
Crypto Market Fragmentation
The next reason of the Volatility of the Bitcoin is the Disintegration of the market of cryptocurrency. Today, there are over 5 000 varieties of cryptocurrencies and the competition and differentiation of digital assets are significantly higher. This is because more projects come up every now and then each with a different value proposition and concepts different from Bitcoin’s.
Also, the market for cryptocurrencies has witnessed a massive entry of shiba inu-style memecoins that have little to no intrinsic value, product, or service to offer beyond the hype. These meme coins can be associated with speculative traders who, depending on their animal spirits, can shift their funds from Bitcoin to other cryptocurrencies thus affecting the price of Bitcoins.
One of the most pressing factors that cost companies a lot in terms of investment is the ever-shifting regulatory environment
Bitcoin’s price volatility is still partly influenced by the continuing uncertainty over the legal tender status of cryptocurrencies. So long as more countries and regulatory authorities are coming up with polices or regulations and standards responding to the utilization of digital assets the issue of using cryptocurrencies will remain ambiguated. US is still in the process of building strategies and legal framework for cryptocurrencies as the Securities and Exchange Commission (SEC) has expressed certain rigidity towards those by pointing out the problems like investor protection, market control etc and money laundering.
We therefore need to notice how national and international governments are changing their regulations in relation to these identified risks and opportunities connected to cryptocurrencies. The unpredictable variable in the form of a regulatory environment is the potential cause for investor to reconsider their position in thePatient population cryptocurrency markets that affect Bitcoin in particular.
Future Prospects for Bitcoin
When thinking of what will contribute most to Bitcoin’s future performance, there are a few signals which stimulate the potential future development of Bitcoin, institutions, regulation, and fragmentation. While pinning down a definitive green or orange flag for Bitcoin may not be possible to confirm at the moment, there is still cause for cheer:
As it is seen, more and more institutions are displaying interest towards Bitcoin and integrating it into their systems, which may well help Bitcoin to become accepted as ‘real money’ with less volatility in the long-run than what is illustrated by this particular graph. Additionally, this continued shift may clear up the ambiguities around cryptocurrencies as well as stabilize the market. However, market segmentation and proliferation of other cryptocurrencies could well keep on creating pressure on the Bitcoin grip on the market and the fluctuating price.
Therefore, I recommend examining the trends and parameters on the Bitcoin market to have a deeper understanding of the exciting but rather volatile Bitcoin journey. However, prospects for getting widely accepted among institutions and facing a stable and favourable regulatory environment or having minimized market dispersion seem uncertain in the long run, there is a chance for Bitcoin to achieve that. However, business may remain turbulent, and politicians and common people, or investors, traders and other fans of virtual money at least shall be more cautious and be wiser as contemporary world develops.
