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Uzone.id – The price of Bitcoin continues to surge over the past few quarters. According to data from Ajaib Kripto, the price of Bitcoin (BTC) reached its highest level in a month at USD70.275 in early June 2024. However, as with any cryptocurrency, one of the challenges that traders must be prepared to face is the volatility of Bitcoin’s price.
“BTC traded between USD56.555 – USD71.946 throughout May 2024. Additionally, Ethereum (ETH) outperformed BTC, closing up +24.65% in May 2024 and trading between USD2.815 – USD3.973,” said Financial expert from Ajaib Kripto, Panji Yudha.
For instance, as quoted from Nasdaq, in mid-September 2023, the price of Bitcoin was around USD26.000, then rose to USD39.000 in January 2024, and skyrocketed to USD73.000 in mid-March this year.
For those who are newbies or still curious to start cryptocurrency, there are a few things you need to take note of about Bitcoin.
What makes Bitcoin so valuable?
This cryptocurrency is built on blockchain technology. Bitcoin is susceptible to price volatility, with high fluctuation rates. The growing demand from institutions for cryptocurrency as an appealing asset class is contributing to its rise.
Additionally, the number of Bitcoins available or that can be mined is very limited, contributing to its high price.
To generate Bitcoin, a process called Proof of Work (PoW) is required. In short, this is a blockchain consensus mechanism that requires significant computational effort from a network of devices. PoW, also known as mining, is a competitive and resource-intensive process to produce new Bitcoin.
How does it work?
Imagine the blockchain as a large ledger. Every Bitcoin transaction adds a new block to the ‘ledger,’ identified by a 64-digit encrypted hexadecimal number known as a hash. Each new block uses the preceding block to generate its hash, creating a theoretically immutable ledger.
Bitcoin miners must solve extremely complex mathematical problems to guess the encrypted hex code for each new block. Whoever identifies the hash correctly validates the transaction and receives a small amount of Bitcoin as a reward.
Several factors contribute to Bitcoin’s current value:
- Supply and Demand
The total number of Bitcoins available is only 21 million. According to Crypto, there are about 1.5 million Bitcoins left to be mined, with the last Bitcoin expected to be mined around the year 2140. Each year, only a certain number of Bitcoins will be released, decreasing every four years when mining rewards are halved. This event, called Halving, automatically reduces the rate at which new Bitcoins are created, thereby decreasing the available new supply. Lower supply generally drives up Bitcoin prices, especially as demand can increase in countries experiencing currency devaluation and high inflation.
- High Mining Costs
Do you know how much effort is needed to solve a single hash? It requires a significant amount of electricity, not to mention the high cost of graphics cards. According to Coincodex, several gaming graphics cards are suitable for mining cryptocurrencies, particularly Bitcoin.
Examples include the Nvidia GeForce RTX 4090, RTX 4080, RTX 3080 Ti, RTX 3090 Ti, and AMD Radeon RX 7900 XTX. Each GPU costs over USD 1,000, such as the RTX 4090, which starts at USD 1,700.
According to calculations, a high-performance GPU like that, assuming an electricity cost of about USD 0.1/kWh, would allow miners to generate only USD 2.29 worth of Bitcoin per day.
- The Most Valuable Crypto
Bitcoin’s market share has declined sharply over the years. In 2017, Bitcoin’s market share was over 80%, but now it’s only about 52%.
Despite the drastic drop, Bitcoin remains dominant in the cryptocurrency market and often signals the rise or fall of other crypto values.
There are several Bitcoin alternatives that are also impressive, such as Ethereum, Solana, Dogecoin, BNB, and USDC (US Dollar Coin). Some experts believe Ethereum might overtake Bitcoin, but others do not see this happening in the near future.
Is Bitcoin a good investment?
The answer to this question depends on your risk tolerance, both financially and psychologically, your time frame, and how diversified your portfolio is.
Cryptocurrencies have high volatility. They can rise or fall rapidly, sometimes soaring sharply or dropping dramatically.
Investing in cryptocurrencies, especially Bitcoin, carries the risk of significant financial loss. With high volatility, you could experience both substantial gains and losses.
Bitcoin investment is also considered very risky. Regulations related to Bitcoin vary across countries, and changes in cryptocurrency regulations can affect its price and liquidity.
It’s important to note that Bitcoin does not generate dividends or interest like other investments (e.g., stocks or bonds), so profits can only be made from price increases.
Bitcoin can be a good investment for some people, especially those with a high-risk tolerance and ready to face significant volatility.
As stated by the former President of Fortress Investment Group and founder and CEO of the cryptocurrency investment firm Galaxy Digital, Michael Novogratz, Bitcoin is predicted to reach previous highs.
“There are many good things happening with Bitcoin,” he said.
However, for those seeking a more stable and less speculative investment, there might be better options. As a general rule, it’s not wise to invest money you cannot afford to lose.
“I’d have to sell it back to you one way or another. It isn’t gonna do anything,” said the famous investor and CEO of Berkshire Hathaway, Warren Buffett, commenting on the risks of investing in cryptocurrencies, especially Bitcoin.
