Hello there! I have got some fascinating news about Bitcoin which I would like to talk to you about.
This is what happened last Friday, and why many people decided to invest more in Bitcoin ETFs despite the fact that the price of Bitcoin had reduced significantly.
Let’s get into it!
Bitcoin experienced a huge drop in its value last Friday. Prior to the July 4th holiday, bitcoin appeared to be doing fairly well but after the reopening of the market it plunged by above ten percent. Just imagine how it feels when a few days can turn the $61,000 figure you saw on your laptop screen into under $54,000 That is very scary, isn’t it?
But this was different: rather than panicking, investors viewed that as an opportunity to buy more.
Now you may ask yourself why anyone would buy more of something they are losing value. It is like buying more chocolate while everyone else says that it tastes awful. These investors see Bitcoin as a roller coaster, betting that this ride will soon go up again and they invested large amounts of money in Bitcoin ETFs based on this belief. ETFs act like large jars where one puts various pieces of bitcoins making them accessible for individuals thereby investing in them easily.
The Fidelity Wise Origin Bitcoin Fund was one of the biggest gainers on Friday. The fund received a massive amount of $117.4 million in fresh investments. That is a lot of money! Other funds that fetched new cash include Bitwise Bitcoin ETF, ARK/21 Shares Bitcoin ETF, and VanEck Bitcoin Trust. People could not wait to buy more Bitcoins at low prices.
After such a big drop, you would expect that it would rise again but it didn’t go back up to where it had been before. Last week it was down 6% from this level and way below its all-time peak of $73,500 registered in March.
So what has caused this price slump? It was due to a few reasons.
First, there’s an ancient exchange called Mt Gox which went out of business years ago. They are going to send back 140,000 BTCs back to their customers and people think this will make bitcoin flood the market thus pushing the price downward further. Suppose all shops suddenly have so many sweets – do you think the price might fall then? Well, that’s what is now happening with Bitcoin!
A second thing is that the German government may offload some of their Bitcoin. Consequently, more Bitcoin in circulation may result in lower prices. This worried a lot of people and due to the two factors combined led to a big crash in prices.
Rather than getting scared away, wise investors looked at it as an opportunity to purchase it for a lesser amount. It’s like when you get a nice jacket on sale –you know it’s worth something hence you quickly grab it before the price goes up. This strategy often follows in investing and is called “buying the dip.”
What are we able to learn from this? Sometimes, when prices fall, that isn’t always bad. Because if you believe your investment will hold value over time then falling prices can be an opportunity for additional investment. The investors of these Bitcoin ETFs are bullish about Bitcoin's recovery and subsequent rise.