Recently, the Bitcoin prices have sky-rocketed creating new all-time highs on almost daily basis recently. However, with such a sharp in the Bitcoin prices in almost no time, news entrants and investors should really read this with a sign of caution and stay aware while making any new investments in Bitcoin.
Although backers of Bitcoin have been floating theories that the price of Bitcoin could almost double from here, it is always good to analyse the other side of the cryptoucrrency as well. If you have been following the cryptocurrency markets recently, one thing to notice is that this rally for Bitcoin has been in isolation while the rest of the crypto-market has not responded with such a strength. In can be noted that during the previous rallies, the rise in price of Bitcoin used to reflect similarly in the overall cryptocurrency market.
Moreover, another reason to be aware is that if we follow the traditional laws of investing, profit-booking at the peak is the inherent nature of investors. One of the reasons why Bitcoin investors don’t prefer profit booking and convert it into fiat currencies, is that there is still no clarity to most of investors regarding the tax structure on cryptocurrency profits. In such times, when the price of Bitcoin is shooting on almost daily basis, it is quite possible that investors might plan to sell Bitcoin and buy Ethereum coins of the equivalent value.
The other factor is that following Jamie Dimon, CEO of JP Morgan Chase, many other prominent and renowned personalities from the financial world have raised caution signs on trading of Bitcoins. Note that although experts have been backing the Blockchain technology, they have been quite skeptical for Bitcoin and other cryptocurrencies. Outrightly rejecting their views and opinions will certainly not be a wise decision.
Also, note that the Blockchain technology which backs Bitcoin, just keeps a track of the Bitcoin transactions and who owns what. This means the technology powers the cryptocurrency. With Ethereum network, the idea of operations is opposite where the coin powers the technology. In the Ethereum Network, the blockchain technology runs a system popularly referred to as “Smart Contracts” (Contracts automatically executed by computer programs). This means Ether coins act as “fuel” to the Ethereum Network. For the program to run everytime, its news fuel i.e. Ether coins. With increased number of people on the Ethereum network, it would need more Ether coins and hence its value should be higher technically.
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