Why Bitcoin should be invested with caution now

Gennady Nikolaev, an expert at the Academy of Financial and Investment Management, shared with BitCryptoNews his vision of the prospects of the cryptocurrency market and his forecast of the nearest changes in the bitcoin rate.

Waiting for the halving

According to the expert, at the moment there are no prerequisites for a significant increase in the value of bitcoin. Since 2018 there is a clear downtrend, the fundamental picture promotes a further fall in the rate to the level of the end of last year $7000-$7500.

For VTS, the first two weeks of 2020 were the most successful in the last 8 years: quotes jumped by 25%, but soon after that the growth rate slowed down, and by the end of January the main cryptocurrency added about 34%. Prices of digital assets are highly correlated, so a similar picture was observed for other popular instruments: etherium (+39%), XRP (+25%), bitcoin cash (+85%), and litecoin (+73%).

There are no serious reasons for cryptocurrency growth yet: institutional players cannot enter the market due to regulatory restrictions and lack of necessary infrastructure, while the enthusiasm of private investors has weakened. There is no significant inflow of new users: the number of active addresses has remained at an average level of 600 thousand for a year, and the number of daily tweets mentioning bitcoin is close to the marks of mid-2016.

The tipping point?

The only reason to buy so far is the upcoming Bitcoin halving, after which miners’ reward for each mined block will be halved to 6.25 BTC. This event will lead to a reduction in coin issuance and market supply, which in theory should have a positive effect on prices, but that is not always the case.

Last August the halving of litecoin took place: on the eve of changes the coin grew up to $144 due to active speculations by “X-day”, but right after that LTC rate quickly went down to $38 and now trades around $67.

Most likely, bitcoin will face a similar fate in the next three months. Other cryptocurrencies will grow for the company, as it usually happens in the digital market: investors will accelerate the leader’s quotes and then pay attention to cheaper coins, which have more potential compared to VTC due to their initial low value. Of course, the downside potential of such assets is also much higher than that of bitcoin, so investors should invest in them with maximum caution.

In February we should expect the VTC to fall to $8500, after which a short-term rise to $10,000 – $11,000 is possible before the halving.

You can find out about the dates of other key events in the crypto industry in 2020 here.

Bitcoin crisis

Gennady Nikolaev believes that there is almost no reason to invest in the main cryptocurrency now, even though it is the only one in the entire market of any interest and does have some potential.

This is because, since the creation of bitcoin, Visa, Mastercard, and other payment systems have tangibly evolved, now offering their customers a very convenient and fast service. For today’s realities, waiting for confirmation of a VTC transaction is too long, and increasing the speed of processing is almost impossible. Many are counting on second-tier solutions, such as the Lightning network, but so far they have not had much effect on the interest of average citizens.

Unfortunately, bitcoin as a means of payment is now only used to circumvent currency controls and as a way to stand out. Nevertheless, it began to show itself as a means of saving value, especially in conditions of economic crisis and hyperinflation in some countries. What this will lead to is still unknown, so it is possible to invest a small amount in bitcoin even now, but keeping in mind the potential risks.

The situation with altcoins

At this moment there is not much sense to invest in Ethereum, because many companies use ETH to raise funds for their startups, and after successful crowdfunding starts to sell internal currency to pay for developers, rent, and other expenses. The other top currencies are less popular copies of bitcoin or ether and have higher volatility.

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