Bitcoin enthusiasts have a new reason to celebrate as the cryptocurrency hit an all-time high on Monday. According to CoinMarketCap, Bitcoin was worth $67,673.74 before falling by 12%. The reason for the 12% slide wasn’t apparent, although cryptocurrencies are known to be quite volatile, with price moves of 20% in either direction quite common in the market.
Because of this volatility, experts recommend keeping your crypto investments to less than 5% of your total investment portfolio. Bitcoin’s high volatility can go to the extreme with the currency falling as low as 80% in some instances. For those that are “die-hard” Bitcoin enthusiasts, the general advice is that once you invest in the currency, look away and don’t be tempted to contantly check on your investment.
Ether remains the world’s second-largest digital coin. Ethereum also hit an all-time high of $4,822.36. The terms Ethereum and Ether are often used interchangeably in the crypto market when referring to this currency.
For the most part, the market has maintained a keen interest in Bitcoin, and despite a listing of more than 13,000 cryptocurrencies, Bitcoin remains the most popular digital currency. Bitcoin’s latest surge seems to come on the heels of the much anticipated first Bitcoin ETF debuting on the New York stock exchange and a record-breaking season for the currency in general.
According to the Executive Director at crypto hedge fund ARK36, Mikkel Morch, a $70,000 price for bitcoin now “seems imminent.”
“Importantly, the uptick doesn’t seem to be leverage driven but rather results from the increased demand on the spot market where there’s currently very little sell-side liquidity,” said Morch.
The DeFi Factor
This surge comes at a time when there’s a lot of excitement around DeFi (Decentralized Finance), a new trend in the crypto market that will make the building of financial applications like lending and trading on the blockchain possible.
DeFi is a term used to refer to financial products and services that are accessible to anyone who can use Ethereum, i.e. anyone with an internet connection. According to DeFi converts, some of the advantages of this modern take on finance and investments is that markets are always open, and there are no blockades such as those found in the traditional financial industry.
Ethereum is a network in DeFi, and some of the most popular DeFi services include; decentralized exchange uniswap, and lending platform Aave, run on the Ethereum network. Ethereum also serves as the backbone of many nonfungible tokens of NFTs, which are similar to digital receipts for rare items such as online art.
The Ethereum Upgrade
Ethereum is currently undergoing some massive upgrades that investors hope will make the network both faster and more environmentally friendly. In light of the ongoing discussion around the environmental impact of most business activities, cryptocurrencies are not being spared either and have been heavily criticized for their huge energy consumption.
Cryptocurrencies have become the buzzwords for change, innovation and rebellion against the status quo, and with all the good news surrounding them, it’s possible to get caught up in the excitement and forget to exercise caution when investing your money. Before you jump the gun and go all in, remember that these are highly volatile currencies that are still in the nascent stage of their development, much is yet to be learned about regulation, control and any safeguards against excessive risk. Therefore, invest with caution.