What Prospective Investors Can Learn from the Bitcoin Price Today

We know that cryptocurrency can seem like a mystery to outsiders. Yet, it’s not as complex as the media would make out. You don’t need a degree in computer science to get to grips with it, either. The fact it’s new and alternative should act as a motivation to learn more about it, not fear it. As far as forecasters can see, the future of digital finance will heavily involve crypto, so now is as good a time as any to try to learn more about it, starting with its most famous child: Bitcoin.

This article will explore the nature of Bitcoin and why it’s a good idea to invest if you get the chance. It’s about how looking at the data on hand can help us to understand the Bitcoin price today and where it could potentially head next. Read on to find out about how external factors drive volatility and how you can potentially anticipate volatility ahead of wild fluctuations in price. Get your investment strategy book at the ready and prepare yourself to take down these crucial tips.

Looking at the Nature of Bitcoin’s Volatility

One thing is obvious from looking at the history of Bitcoin and that’s cryptocurrency’s inherent volatility. Different factors can cause wild fluctuations in Bitcoin’s value, including regulatory news and speculative trading. The lack of regulation in the cryptocurrency market leaves it susceptible to the influence of external factors. However, volatility can present opportunities for reward as well as risk. It makes sense that our instincts would tell us to invest in Bitcoin when the price is on a sharp rise. Yet doing so would be unwise as history has shown that valuation soars in a bubble before suffering a steep correction. Therefore, it’s best to wait on the correction first.

There are famous instances you can look at for reference, such as the price dip from 2017 to 2019. At one point, Bitcoin was worth $20,000 before falling as low as $3,000. It’s the low point that you should invest, following the investment adage of ‘buy low, sell high.’ These examples teach us that volatility can be a double-edged sword. Sure, there is obvious potential for high rewards, but significant risks are equally present. Due to the nature of this type of investment, prospective investors should prepare themselves for the worst.

The Influence of External Factors

External factors have a big impact on the Bitcoin price today. While traditional assets like stocks are influenced by company performance, more fickle reasons can cause the price of Bitcoin to change. For example, a bank’s adoption can lead to price surges. On the other hand, announcements from governments intending to crack down on unregulated currencies can have an adverse effect, causing the valuation to plummet. At times, the fluctuations can seem fickle.

The way technology develops can influence Bitcoin’s price, such as improvements in the security of the Bitcoin network. These updates increase investor confidence and drive up prices, while security breaches, naturally, have the opposite effect. The broader economic climate also plays a big role in Bitcoin’s price, with financial analysts often touting it as a “safe haven” asset during times of uncertainty. And this analysis improves the wider public’s perception of Bitcoin and drives up its price.

It makes one wonder, how do you stay ahead of all of these changes? Well, it’s impossible to stay ahead of all of them, but you can stay ahead of some if you keep an ear to the ground for broader economic news. If you sense that a crackdown is coming, the price may dip; if inflation is rising in traditional markets, the price may rise. Listen to experts and you might keep ahead of it. But know that even experts lose money in periods of financial uncertainty, so take every tip with a pinch of salt.

Strategic Approaches to Bitcoin Investing

Using the past examples as lessons about Bitcoin’s volatility, future investors should approach Bitcoin with a clear strategy. Don’t only judge whether to invest in Bitcoin on Bitcoin’s price today, but on a multiple of factors that give an indication of the cryptocurrency’s long-term value. Additionally, you must also assess your own risk tolerance before making any decision. Consider popular strategies to employ, like dollar-cost averaging (DCA) and diversification, to mitigate risk and ensure that you’re not devastated by a price dip.

More than anything else, have a clear exit strategy in place. When the price is fluctuating, it’s very easy to lose your head, which is why you should have predetermined levels at which to sell Bitcoin, both to take profits and cut losses. This plan will help you avoid making any emotional decisions during these extremely volatile periods when you’ll be feeling pressured to act. That being said, have realistic expectations before investing. Bitcoin can deliver incredible returns but it’s not a guaranteed path to wealth. The cryptocurrency market is still in its early stages, and so, its future is uncertain. If you are to invest, don’t lose your head in the process.