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May 1, 2024

Bitcoin’s Roller Coaster: Time to Worry or Buy In?

Bitcoin, the leading cryptocurrency globally, has been on a roller coaster ride in recent weeks, experiencing significant turbulence. As the euphoria surrounding US exchange-traded funds (ETFs) for the largest digital asset wanes, Bitcoin is facing its worst month since the collapse of Sam Bankman-Fried’s FTX empire. With a 14% decline in April, the cryptocurrency market is abuzz with questions: Is this decline a cause for concern, or is it presenting a lucrative buying opportunity?

Several factors are contributing to Bitcoin’s price plunge, with one of the primary reasons being the recent Bitcoin halving event. This event reduced Bitcoin miner rewards from 6.25 BTC to 3.125 BTC, aiming to increase demand and drive up prices in the long term. However, the market’s response has been sluggish, leading to a temporary decline in price.

Another contributing factor is the introduction of spot Bitcoin ETFs in Hong Kong. While this development is expected to attract capital inflows into Bitcoin, it may take time for the market to fully digest the impact of this new investment vehicle.

According to Parth Chaturvedi, Investments Lead at CoinSwitch Ventures, “Bitcoin as an asset class doesn’t trade in isolation and is affected by macro-economic factors. With US inflation higher than expected, investors are rebalancing their positions for higher interest rates, for a longer duration. This doesn’t bode well for risky asset classes and hence has impacted crypto prices adversely. Besides this, bitcoin prices had almost doubled since January on the back of Spot ETF inflows and the halving event. The downturn in prices was amplified by profit booking as well.”

Despite the current decline, technical analysis suggests that Bitcoin remains bullish. A bull flag formation on the daily chart indicates a potential ascent to $100,000 or beyond. This technical formation is confirmed when the price breaks above the upper boundary of the flag to the upside, setting a target price by adding the percentage in the flag’s posts to the breakout point.

However, experts advise caution to potential investors. While Bitcoin has shown remarkable resilience and growth potential in its price history, the cryptocurrency market is notoriously volatile. It can be influenced by various factors such as global economic conditions, regulatory changes, and market sentiment.

Investing in Bitcoin or any cryptocurrency requires careful consideration and risk assessment. While there may be opportunities for substantial gains, there are also significant risks involved. It’s essential for investors to conduct thorough research, stay informed about market developments, and only invest what they can afford to lose.

In conclusion, while Bitcoin’s recent slide may raise concerns for some, it could also present an attractive buying opportunity for others. The key lies in understanding the market dynamics, evaluating risks, and making informed investment decisions. As always, in the world of cryptocurrency, caution and diligence are paramount.

Jhumpa Lahiri

Jhumpa Lahiri

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