The price of Bitcoin, the world’s largest cryptocurrency, has been showing signs of stabilisation after a prolonged period of decline that lasted for more than a year. Experts say that this is a positive sign for the future of Bitcoin and that now might be the best time to invest in the digital asset.
Bitcoin reached its all-time high of $68,990 (Dh253,405) in 2021, but since then it has lost more than half of its value. The crypto market suffered a massive sell-off in 2022, triggered by aggressive interest rate hikes by central banks worldwide. This led to what some analysts called a “crypto winter”, a term that refers to a prolonged bear market for cryptocurrencies.
However, in recent months, Bitcoin has been trading in a narrow range between $20,000 (Dh73,500) and $25,000 (Dh91,826), indicating that the volatility in the market has reduced. This is a notable change for Bitcoin, which was once known for its extreme price swings. According to Brian Deshell, a UAE-based cryptocurrency trader and analyst, this means that Bitcoin is becoming more mature and stable as an asset class.
“Many new investors are now treating Bitcoin as a long-term investment option, rather than a short-term speculative asset. As more people start holding on to their Bitcoin for longer periods of time, the demand for Bitcoin will become more stable, resulting in less price volatility,” Deshell said.
He added that the Bitcoin market is also growing in size and diversity, making it harder for large traders or institutional investors to manipulate the price. The market cap of Bitcoin alone is now at almost $600 billion (Dh2.2 trillion), with the global cryptocurrency market valued at $1.08 trillion (Dh3.97 trillion).
“The larger Bitcoin’s market cap becomes, the harder it is for large buy or sell orders to have an effect on the price. In addition, the Bitcoin market is maturing. The world’s first cryptocurrency is no longer just a niche investment alternative for a few tech-savvy investors. It’s now a mainstream investment option for millions of people and even some institutions,” Deshell said.
Some of these institutions include top investment banks such as Goldman Sachs and Standard Chartered, which have recently expressed bullish views on Bitcoin. Goldman Sachs suggested that the crypto winter has come to an end and that the price of Bitcoin could rise steadily in the near future. Standard Chartered predicted that the price of Bitcoin could reach $100,000 (Dh367,000) by the end of 2024.
Brody Dunn, an investment manager at a UAE-based asset advisory firm, agreed that now is a good time to invest in Bitcoin. He said that despite the price drop from its peak, Bitcoin still offers high returns compared to other financial markets.
“While there was earlier a lack of confidence among investors with how the market reacted on volatile currency moves, that’s no longer the case, and this will affect long-term prospects for Bitcoin,” Dunn said. “Bitcoin is more stable than it’s been in years. As the crypto managed to hit the $31,000 (Dh113,865) mark back in July, a tremendous growth of 90 per cent, meaning that Bitcoin brought huge returns for the investors who decided to buy the dip. So now might well be the perfect time to invest.”
Dunn also pointed out that Bitcoin’s volatility has been decreasing over time, making it more attractive for risk-averse investors. He said that as Bitcoin becomes more widely accepted and regulated, its volatility will continue to diminish and its demand will increase.
“In time, the cryptocurrency could become a more attractive option for portfolios of all risk levels. Even better, as more investors begin to see Bitcoin as a legitimate asset class, the demand for the cryptocurrency should continue to grow,” Dunn said.
“This will in turn not only help to stabilise its price but cause it to rise as the pressures of increased demand meets Bitcoin’s finite supply of 21 million coins. This won’t happen overnight, but data show Bitcoin’s volatility has been diminishing over the years.”
Bottom line? Ahead of the day when Bitcoin becomes a legitimate asset for investors of all risk levels, it makes investing today a promising opportunity with the cryptocurrency still almost 60 per cent below its all-time high.