Right now, the bitcoin price is trading above $40,000. The asset is doing better than it ever has and it has even reached a new all-time high.
The Bitcoin Crash of 2018 Is No Longer Likely
If this kind of behavior doesn’t sound familiar yet, it should. This is exactly what bitcoin went through three or four years ago. The asset continued to spike and spike like it never had before. It was adding hundreds to thousands of dollars to its price each month and eventually shocked the world when it rose to $19,000+, which at that time, was the tallest peak the cryptocurrency and its many fans had seen.
But as we all remember, 2018 saw the currency fall to new lows, ultimately losing about 70 percent of its value by the time Thanksgiving rolled in. The asset dropped down into the mid-$3,000 range, and it took several months for the currency to recover.
However, many analysts are telling us at press time that the need for worry has come to an end. They say that bitcoin is not likely to repeat its 2018 behavior in 2021, and that traders don’t need to be concerned about losing all their money in a sudden flash crash like they did three years ago.
Why, exactly, are traders suddenly so free from any trouble? Well, analysts lay out three specific reasons. The first is FOMO, or fear of missing out. It appears that everyone is looking to get involved with the bitcoin and crypto craze this time around, whereas that wasn’t the case three years ago.
There were still many people – primarily institutional investors – that still saw crypto through a suspicious lens, and while bitcoin and most other assets were doing extremely well, they just weren’t willing to risk all they had on a relatively untested and new investing arena at that time.
Now that companies like Square and MicroStrategy are getting involved, and firms like PayPal are now allowing customers to buy crypto, people see things a little differently and believe BTC to be far more legitimate than it ever has been, which ultimately leads to the number two reason: bitcoin and crypto are now viewed as lawful and sincere assets.
The third reason is that bitcoin is being viewed as a hedge tool. It’s no longer just a speculative asset, but rather something that can keep one’s wealth stable during times of economic strife.
There Could Be a “Small” Correction
In a recent interview, Jimmy Nguyen – president of the Bitcoin Association – explains:
People are seeing a move to [bitcoin] as a reserve asset, knowing there’s a limited supply of bitcoin and saying, ‘okay, I want my piece of it before it goes too high in price.’
He further states that while BTC may experience a slight correction in the coming future, it won’t be anywhere near as drastic as what occurred in 2018.