Bitcoin is the most traded cryptocurrency and one of the world’s fastest growing tradable assets. Its price skyrocketed in 2017, rising from under $1,000 at the beginning of 2017 to around $20,000 at its zenith. 2018 could ultimately prove to be just as profitable, but many analysts are worried about the erratic trajectory of Bitcoin’s price evolution and think that the bubble could be about to burst. They often compare it to the Dutch Tulip Mania of the 17th century, one of the most notorious financial bubbles in history.
In December, the CBOE (Chicago Board Options Exchange) launched a new financial product allowing investors to take part in the cryptocurrency revolution through a regulated exchange offering Bitcoin Futures. Since then, the price of the world’s favourite altcoin has increased exponentially, driven by speculators keen to ride the crypto wave, as well as by casual investors who buy Bitcoin as a long-term position or even as a status symbol. However, according to Paul Donovan, Global Chief Economist at UBS, the “Bitcoin bubble” could be “very destructive in the long term”.
Meanwhile, Philip Lowe, Governor of the Reserve Bank of Australia (RBA), calls the Bitcoin phenomenon “speculative mania”. On the other hand, some analysts regard the emergence of Bitcoin derivatives as a sign that serious institutional investors are becoming more interested in a cryptocurrency market that was previously dominated by independent retail traders, seeing it as vote of confidence in the future of Bitcoin and other digital currencies.
After peaking at more than $20,000 on December 17th, the Bitcoin price plummeted to $12,238 in only a few days. According to a report from Axios Media, the monetary impact of this crash could be up to $250 billion.
Cryptocurrency prices have always been extremely volatile, which is at the heart of their appeal, but can also be challenging, especially for new investors. Top cryptocurrencies brokers such as UFX.com offer a wide range of tools to help traders around the world apply sound money management rules when buying and selling Bitcoin and other altcoins like Ethereum, Litecoin and Ripple.
Because cryptocurrencies are a relatively new type of investment, the markets are still maturing, and wild swings should be expected. Independent of underlying assets and national and supranational currencies, it’s much more difficult for traders to apply fundamental analysis to their strategies. However, with advanced economies like Japan leading the way in normalising Bitcoin as a recognised currency and accepted payment method, the biggest trading profits might be yet to come.