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Why is Bitcoin price falling? How to protect your portfolio in the bear market

Avatar of Content Partner By Content Partner Jun28,2021 #Bitcoin
Bitcoin price falling
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The massive decline in the price of Bitcoin caught the attention of the media and everyone in the world. Bitcoin being the pioneer and the first successful cryptocurrency plummeted after reaching an all-time high of $63,000 this April to around $30,000. As expected, once bitcoin starts plummeting, most altcoins follow suit.

Bitcoin’s volatility was fully witnessed when it dropped by 29% in May after China banned banks and financial institutions from facilitating crypto transactions. This is one among many other factors that caused the dump. Such sudden swings in cryptocurrencies raise questions about the risks and viability of crypto investments. 

Why is Bitcoin price falling

In line with this, let’s discuss the factors that can influence the price of Bitcoin i.e. factors that can make the price rise and fall, and how to protect your portfolio in the bear market.

You can also find out more information about the crypto crash. 

Factors that influence the price of Bitcoin

We need to understand that in the crypto space, demand and supply are the most crucial factors. The higher the demand for Bitcoin or the higher the number of people buying Bitcoin, the higher the price. Conversely, the higher the supply or the higher the number of people selling their Bitcoin, the lower the price goes.

Every other factor is only influencing the demand and supply which will concurrently affect the price of the coin. Several factors can influence demand and supply, some of which we will examine in this article.

  1. Mass media

One important factor is the mass media. The media has the power to drive the adoption of a coin with the news they share.

The media can drive mass acceptance of an asset by simply talking about it, telling us the advantage of crypto, and build the confidence of people. In this case, when the mass media talks positively about Bitcoin, the number of people that will want to buy Bitcoin in Nigeria and every other part of the world will increase and this would eventually drive the price up. When the media talks down on a coin, FUD sets in, and people begin to sell off their coin thereby causing a reduction in its price.

  1. Government Regulation

People naturally have confidence in the government. Whenever the government has a reservation about something, it might be because the government isn’t convinced about how it will benefit its citizens or perhaps isn’t convinced about the effect of that thing on the economy at large. If the government of Nigeria for instance should adopt Bitcoin, Nigerians will adopt it in mass. 

Countries have adopted bitcoin and allow the use of cryptocurrency for trading and carrying out a transaction. That alone increases the number of people that are willing to buy Bitcoin in the country. Conversely, if a country should issue a ban on cryptocurrency, the number of its citizens that will sell their Bitcoin will increase causing its price to decrease.

Nigeria, for example, hasn’t adopted the use of Bitcoin for now but they are trying to create their own CBDC which when is finally out, will drive the adoption of cryptocurrency up and the number of people that will buy Bitcoin in Nigeria will increase.

  1. Celebrity Adoption

The influence of celebrity adoption cannot be over-emphasized. The effect it can also play on the market cannot be overlooked. If we can recall vividly, Bitcoin price falling from around $63,000 to around $30,000 was triggered by what Elon musk said about the power consumption of Bitcoin mining. Elon who is the world’s richest man and a very influential person in the field of innovation and technology talked down on Bitcoin because of the energy it consumes, he referred to the effect it can have on the environment and that had a very significant negative effect on the price.

When celebrities and influential people adopts Bitcoin it has a positive effect on the number of people adopting it and will cause an increase in its price. The news of a popular celebrity buying Bitcoin or using it for a transaction will make people comfortable using it and the number of people that will buy Bitcoin will increase.

  1. China factor

Following the directive that Chinese banks should stop facilitating crypto payments because of their volatile nature, Bitcoin dumped below $31,000. Other cryptocurrencies followed suit. This is not the first time crypto regulations in China would affect the price of bitcoin. 

  1. Breach in security or scams

Another necessary factor to note here is the breach in the security of exchanges. When hackers hack platforms where people go to buy Bitcoin, it has negative effects on the price and can make the price fall greatly. One thing people don’t joke about is the security of their wealth. When investors/traders find out the go-to crypto exchange platform has been hacked, they liquidate their portfolio on the exchange and sell-off.

How to protect your portfolio in a bear market

The crypto market is made up of two periods – the bull market and the bear market. The bull market is a period when there is an expected increase in price and a bear market is a period of decrease in the price of the cryptocurrency. These two periods are inevitable, and you need to be very wary of the bear market because it can break you. To protect your portfolio in a bear market:

  • Don’t sell at a loss.
  • You can buy more if you have the money so when the bear period is over and the bull takes over you will quickly recover your loss.
  • Diversify your investment into many assets.
  • Invest in assets that can survive the bear market and bounce back

With this piece, we have been able to cover factors that can make the price of Bitcoin fall and rise. However, if you need an exchange where to buy Bitcoin in Nigeria with little fear of losing your money to scams or hackers. Visit Remitano

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