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While digital coins have experienced their fair share of challenges, future-oriented investors wait for the waters to clear in order to see the performance of their Bitcoin investments improve. Upward trajectories are expected as the inflation rates lower, with the drops being mainly expected somewhere next year, around the coin’s upcoming halving.
The reigning cryptocurrency, Bitcoin, as well as its competitors, have been on a rollercoaster ever since their inception, providing impressive opportunities to make profits in their golden days, with the year 2021 marking all-time highs that are yet to be witnessed this year. While cryptocurrencies’ spectacular entrance into 2023 would inflict hope that the bull market is just around the corner, things seem to take a little longer to stabilize. Bitcoin has recovered pretty well from the past winter, more than doubling in price. Yet it’s not the time to show its full potential, meaning that investors who haven’t included it in their portfolios can still take advantage of its reasonable price.
Investors can point at several culprits behind the detrimental cryptocurrency movement. The rising interest rates, raised ten times so far by the Federal Reserve to counteract the growing inflation, took their toll on cryptocurrencies, as they turned investors’ focus on assets with lower risks involved, stinging demand for the virtual coins. Simultaneously, investor mood has remained in place, demonstrating neither escalations nor declines for the better part of the year.
Despite all the difficulties that wreaked havoc in the cryptocurrency sector, seasoned investors with long-term perspectives hold on to their cryptocurrency holdings, knowing that the witnessed downturns are nothing unusual to financial markets, especially when they are in their developmental stages, as is the case with Bitcoin.
As such, while no price chart or cryptocurrency expert can predict what will happen in the future, several trends and analyses can help you create a clearer picture of where Bitcoin is headed.
So, should you resort to Bitcoin to improve the performance of your investment portfolio, and what do existing signs indicate?
Bitcoin continues to serve its economic purposes
Bitcoin has evolved from a coin rewarded to miners for their efforts to validate and attach blocks to the chain to a mature asset serving multiple purposes. The economic role played by the leading cryptocurrency by market capitalization has varied throughout time, ranging from a currency type that would overcome the limitations in the financial system to a speculative asset where the high volatility can generate profits if handled correctly.
Furthermore, the likes of Bitcoin becoming a safe-haven commodity are increasing, as recent movements suggest. By looking at the past performance of traditional assets such as gold that act as safe havens, we can conclude that Bitcoin has outperformed them. Moreover, the asset ended the third quarter of 2023 with better results than those recorded by most S&P 500 companies this year and is expected to keep outplaying them. A great role in achieving similar results stemmed from the token’s finite maximum supply of 21M coins, aimed at making it a deflationary asset.
Bitcoin registering top performances and increases of around 70% indicates that demand for the asset will persist, further fueling the token’s value continuously.
More investors are holding on to their Bitcoin HODLing strategy
The term “HODLing,” describing a commonplace investment strategy, emerged from a typo in the spelling of “hold” and became a core principle for cryptocurrency enthusiasts seeking to take advantage of Bitcoin. It represents a buy-and-hold endeavor where an investor would purchase a seemingly-rewarding asset and keep the investment untouched until prices grow high enough to generate the desired ROI.
These days, Bitcoin investors are increasingly adhering to HODLing strategies, as recent data from the blockchain analytics provider Glassnode shows. Out of all the Bitcoin invested over time, almost 68% has been lying dormant in owners’ wallets for the past year, with around 55% staying untouched over the last two years and 40% being held for three years.
While the HODLing trend is not necessarily positive for the market’s long-term health, it points in one direction. Cryptocurrency owners are patiently waiting for the appreciation of Bitcoin’s price, which is expected to occur gradually as the world approaches the token’s next halving and inflation rates are supposed to decrease.
Bitcoin’s halving in 2024 drives a bullish sentiment
Once every four years, an eagerly-awaited event in the sphere of cryptocurrency occurs, making investors prepare to cash in on the potential price upswings that may come as a result. While the Bitcoin halving is not a reason to rejoice for miners who make money from mining blocks, it is seen mainly as a positive phenomenon regarding Bitcoin’s price. Historically, there have been recorded increases in the asset’s value due to past halvings or upgrades to the blockchain that cut the miners’ rewards for mining Bitcoin in half. The reward reduction proved to be a catalyst for the token’s price, which inflicts confidence in the future of digital assets one year from now.
Given that the last halving event occurred in May of 2020, the following one is expected to happen around the same time in 2024. Many investors hold high expectations for this milestone event, hoping it will follow in the footsteps of the previous ones, which sparked off impressive bull runs that rewarded investors who held on to their assets.
How to approach Bitcoin investments this year
As Bitcoin keeps appealing to newbies and investors alike, the pressing question remains whether the pioneer cryptocurrency will reclaim the $5K mark in the upcoming period. As data suggests, the market leader is poised to improve significantly should the conditions enumerated above be met. We could expect Bitcoin’s future performance to improve with increased adoption, higher institutional interest, and lowered interest rates.
Whatever the future holds for Bitcoin or its counterparts, it is best to base your decisions on unbiased sources of information and assess your risk tolerance in order to develop an investment strategy that will reward you when the market fully recovers.
