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Bitcoin: Is A Second Big Crash Coming?

What word would you use to define bitcoin? Revolution? Bubble? Miracle? Future? The list is huge but I'll stick with Volatility for now.

By HowToFind .comPublished 3 years ago 2 min read
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Bitcoin: Is A Second Big Crash Coming?
Photo by Executium on Unsplash

For those of you who are less versed in financial terminology, when we talk about volatility we are referring to both the frequency and the intensity of changes in the value of a specific asset.

The lower the volatility, the greater the reliability, but also the lower the return. Higher volatility signals higher risks, but also the possibility of a higher profit (or of losing it all, of course).

That is the reason why many financial regulators, such as the National Securities Market Commission in Spain, oblige entities that market investment funds to offer future investors an information sheet called the Key Investor Information Document (KID), and to include in it the risk profile of the investment, with a value between 1 (minimum risk) and 7 (maximum risk).

Obviously, not only volatility is not taken into account to establish this score, but it is a very important element in the calculation.

A quick glance at bitcoin's history shows us that its rate of change, at times, has been comparable to the profile of a roller coaster (and surely many of its investors have felt as if they had ridden one).

In mid-December 2017 bitcoin was selling for more than $19,000, but at that point it began a fall that saw it bid farewell to the year hovering around $10,000, and a little less than a year later its value was less than $3,000. Many thought, at the time, that the bitcoin bubble had burst.

However, since March last year and as if it had undergone a full steroid treatment, bitcoin has climbed a virtual Everest that, week after week, has been adding new record highs, in a path that has made it reach over $60,000 a week ago.

However, days later, its exchange rate in recent days has dropped to around $37,000 (exchange value at the time of writing).

By André François McKenzie on Unsplash

A drop of about 23% in one week, surely the sale of blood pressure monitors has skyrocketed in certain areas.

Now, of course, the question is whether this decline is a one-off movement or, on the contrary, signals the beginning of something worse, and as we can read in Fortune, the outlook for bitcoin in the short term does not seem too positive.

According to the analysis presented in this text, investors are targeting safer assets, leaving somewhat aside investments subject to greater volatility and risk, such as bitcoin.

If this reading is confirmed, which also affects other cryptocurrencies such as Ethereum, this week's abrupt decline could be just the beginning, giving rise to a second crack similar to that of Christmas 2017 in which, after the abrupt fall these days, the value of bitcoin maintains a downward path that could drag on for months, and we do not know how far it can go.

It does not seem at all likely that it will reach lows lower than those of the 2018-2020 period, but it is enough for it to get a little closer to them, so that its depreciation from the high of a week ago is a clear sign of the risks of cybercurrencies.

The most positive reading we can take from this, mind you, is that a hit from bitcoin, Ethereum and so on means that the graphics card market could experience some relief, as in those circumstances miners will surely rethink their investments and lift their foot off the accelerator a bit, making it easier for end consumers to acquire them.

Every cloud has a silver lining, right?

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HowToFind .com

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