Bitcoin has put together an astonishing bull run since the early summer of 2020. The top digital currency has crushed the peak times published during the bull run in 2017. Bitcoin challenged $ 60,000 in the latter part of February. But since then, it has fallen back below $ 50,000. What is behind the latest case in cryptocurrencies? Should investors buy dip? Or are digital currencies about to face a sharp correction, as we saw in the aftermath of the bull run in 2017?
Bitcoin: Why it hit turbulence in late February
In early February Tesla Founder Elon Musk said he had invested $ 1.5 billion in Bitcoin. This lit a fire during the already glowing crypto market. Tesla reportedly made a profit of $ 1 billion from Musk’s major investment in Bitcoin. This exceeds the profit that Tesla made from its electric vehicles last year. Musk has shown its ability to move markets with its huge reach for social media. However, he is not the only billionaire with a microphone and looks at the crypto room.
Warren Buffett has in previous interviews called Bitcoin a “rat poison”. He has said that the digital currency has no inherent value. Bill Gates, the founder of Microsoft and an influential voice in global health, warned that investors should “watch out” for Bitcoin’s high valuation. The criticism did not end there. Janet Yellen, former chairman of the Federal Reserve and the current US Treasury Department, called Bitcoin “extremely inefficient.”
These bearish comments seemed run down the price of Bitcoin in the following days.
Does the cryptohistory 2020/2021 reflect the bull run in 2017?
Bitcoin became a household name during Bull Run 2017. Institutional and retail investors flocked to the cryptocurrency space, and many were happy with the development of the blockchain. This bull market stopped in early 2018. Bitcoin and its peers were at the crossroads of international regulators.
Crypto bulls should be encouraged by developments in 2020 and early 2021. Unlike 2018, Bitcoin has been embraced by regulators, top payment processors and brokerage firms. PayPal adopted the best digital currency in 2020, and WealthSimple began offering Bitcoin on its platform. Last month, Canada launched the very first Bitcoin-focused exchange-traded fund (ETF). This common embrace should provide a stiffer floor for Bitcoin and its peers in the future.
Are you going to jump into Bitcoin today?
Bitcoin may be more robust than it was in early 2018, but that does not mean that it does not involve huge risks. Canadians who want to stash Purpose Bitcoin ETF in their TFSA or RRSP in March should be careful. The shares of this ETF decreased by 1.7% during early afternoon trading on March 2. Hut 8 Mining, a top encryption company, has seen its stock give way to these headwinds in recent weeks. However, its shares are still above 180% by 2021 so far.
In December 2017, I would discussed the battle between crypto and alternative assets such as gold and silver. Gold also hit record highs in 2020. However, the yellow metal has been sharply corrected in late 2020 and early 2021. I’m not keen on jumping on the Bitcoin train given its soaring valuation right now.
On the subject of blockchain shares …
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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fools’ board. Poor contributor Ambrose O’Callaghan has no position in any of the said stocks. David Gardner owns shares in Tesla. Tom Gardner owns shares in Tesla. Motley Fool owns shares in and recommends Microsoft, PayPal Holdings and Tesla and recommends the following options: long January 2022 $ 75 call on PayPal Holdings.