Bitcoin is the largest cryptocurrency in the world based on market capitalization. As the first digital currency to appear on the market, BTC served as the blueprint for all the altcoins that followed it, as they operate on essentially the same technology powered by the blockchain. Since January 2023, it has been on a constant journey of recovering the value it lost during the 2022 crypto winter, which analysts now believe was the worst of its kind to ever impact the crypto ecosystem.
However, the road to growth isn’t linear, and Bitcoin still has to deal with challenges along the way. The most noteworthy is that there will be constant price drops even during the bullish run. What sets them apart from last year’s events is that the losses are unlikely to impact the market in the long term.
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Price drop
On the 24th of July, the Bitcoin price registered a noteworthy price drop in the context of investors waiting for the Federal Reserve’s policy decision. BTC decreased by around 3% but has since made some gains as well. Previously, it had sunk to $28,995, its lowest level in over thirty days. Although it’s still uncertain what caused the shift, some investors suspect it has to do with increasing regulatory pressures.
Some investors are apprehensive because of the shifts, unsure of how to act and structure their portfolios to protect their holdings. Others have claimed that it’s a normal part of the recovery process and that not all fluctuations should be blamed on regulations. In the meantime, Bitcoin moves within a relatively narrow range and will continue to do so until the rest of the week. Although Bitcoin remains resilient, traders are worried that the possible recession and the fact that the economy might be slowing down mean that cryptocurrencies might also suffer.
Since the personal consumption expenditure for June isn’t yet fully known, stopping interest rate hikes isn’t yet a certainty until it’s certain that inflation is actually coming down. That also means that BTC isn’t likely to break through the $31,500 level, at least not for a while.
Long-term holders
One of the most popular strategies you can adopt for your portfolio is holding cryptocurrencies over a long time and letting them grow. However, it’s easier said than done, especially for an asset such as Bitcoin. That’s because price fluctuations are a constant thing for digital assets, and it can be pretty challenging to avoid selling if you notice all the traders around you doing so. However, the investors that chose to go down this path have typically seen tremendous returns, although they had to wait several years for results to materialize.
Yet, for many, this is an integral part of the fun of the experience, and that delayed gratification makes the possibility of reward even more satisfying. And it seems most Bitcoin users would agree with this assessment. Research shows that approximately 93.5% of the current supply is owned by long-term holders. The amount that this subset of investors holds is significant for the overall market since it creates scarcity.
The all-time high figures of 2015 might soon be equalled or even surpassed by those of 2023 as Bitcoin continues to become rarer. Investors are moving their holdings to cold wallets at a record pace. As part of regulating the supply through the halving events that occur approximately every four years, miners receive half of the previous amount of a reward. As a result, fewer new coins are available on the market all the time.
The natural result of these movements is that the price continues to increase over time in response to changes in supply and demand. Combined with transparency and security, scarcity makes investors willing to pay for Bitcoin. The long-term holders are those that kept their coins for at least 155 days and are currently the ones with the most Bitcoin on their hands.
Some believe that the current trend, which mirrors previous ones from April 2021, October 2020 and the historic record of 2015, has been exacerbated by the bear market and ensuing crypto winter, which have been so difficult to shake off. Yet, the prevalence of hodling continued even during the accumulation phase of the bull market. And the previous bear market of 2018, the crisis caused at the beginning of the pandemic in 2020, and the troubles of 2022 haven’t caused similar movements.
Mining
Since Bitcoin emerged on the market, the mining process has been the center of discussion due to its allegedly unsustainable operations. Critics argue that the energy-intensive process is a resource-guzzler that puts undue strain on electrical grids and wastes energy. There are some fair points here, given that mining has been shown sometimes to exceed the consumption of several medium-sized countries.
However, the crypto community said they believe miners are unfairly targeted, especially considering that other industries consume just as much, if not more. Moreover, miners have claimed that, in many instances, mining has acted as an incentive to furthering renewable energy developments and creating jobs in rural areas.
There’s also a lot of potential in the fact that mining provides a demand mechanism for power grids. Economic improvements in renewable energy generators, including solar and wind, through the use of stranded energy means that mining guarantees these resources can improve their functioning and expand capacity. It also gets energy consumption peaks and continues even when electricity demand is negligible, such as at nighttime.
And although many wouldn’t believe it, Bitcoin mining is also invested in boosting renewables infrastructure. Since miners require cheap power rates to remain competitive, they’ll most likely operate in areas where green sources of electricity are abundant. If the mining process were to be relocated to those areas, it wouldn’t only help the market but also encourage the development of other projects that use eco-friendly energy.
The cryptocurrency world is diverse and innovative, continuing to evolve at a fast pace regardless of how much time passes. That’s the main reason why so many investors have remained loyal, despite the fluctuations and price changes.
