22.02.202118:00 Forex Analysis & Reviews: Cyclical activity and lack of systematic growth: why large investments in bitcoin are dangerous for cryptocurrency

Relevance up to 10:00 UTC--5

Bitcoin has been experiencing a real renaissance in the past few weeks. The value of the first cryptocurrency rises to new heights every week. This, in turn, increases the investment attractiveness of the coin and increases the hype around the crypto market in general. However, many experts reacted very negatively to the sharp rise in the price of bitcoin. And in some ways, they are right.

Specialists at the investment bank JPMorgan said that the increased attention to bitcoin has an extremely negative impact on both the asset itself and the crypto market. The company's analysts pointed out that the first digital asset is the worst way to protect stocks from falling in price. The bank is confident that the growth of bitcoin is associated with an increased investment demand, which causes the coin to correlate with other cyclical assets. Experts consider this phenomenon, in the context of the crypto market, exclusively as a negative phenomenon.

Indeed, the strong relationship between bitcoin and large investments makes the coin less "independent". At this rate, the first cryptocurrency can become an asset that depends solely on economic indicators. This not only excludes the possibility of systematic growth but also emphasizes the main disadvantage of bitcoin - its high volatility.

Exchange Rates 22.02.2021 analysis

JPMorgan also disagrees with the thesis that bitcoin is a great way to avoid inflationary losses. However, you can't argue against statistics - thanks to the first cryptocurrency, the holders not only saved their funds but also increased them by 30%. At the same time, everything here rests on the cyclical nature of the cryptocurrency, which allowed the asset to increase its price. Therefore, it would not be entirely fair to call bitcoin an excellent alternative to gold in the long term. The difference between the safety margin and the stability of these assets is too great.

A similar point of view was expressed by Elon Musk, CEO of Tesla Motors, saying that such a huge investment in cryptocurrency from the company is a gamble. Indeed, the words of the experts are hidden behind the words of truth - bitcoin cannot become more independent, on the contrary, the turnover of an asset is associated with a constant inflow of investments, which is characteristic of a certain economic environment. This may be a problem in the future, however, it is not worth presenting a local investment surge and the dependence of an asset on it in a fairly short area as a problem that has already taken place.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Artem Petrenko,
Analytical expert
InstaForex Group © 2007-2021
Benefit from analysts’ recommendations right now
Top up trading account
Open trading account

InstaForex analytical reviews will make you fully aware of market trends! Being an InstaForex client, you are provided with a large number of free services for efficient trading.

Can't speak right now?
Ask your question in the chat.