Is Bitcoin a Balloon?
How to Trade for Beginners and
What to Expect in 5 Years

See also: Risk Management

Bitcoin is by far the most successful cryptocurrency in the world. Many cryptocurrencies have come up today all with almost the same goal of replacing Bitcoin. However, Bitcoin keeps getting stronger and earlier this year it nudged $65,000 per unit.

According to the chief investment officer at Morgan Creek Capital Management Mark W. Yusko, Bitcoin’s price could rally to $250,000 per unit over the next 5 years, a price that could drive its market capitalization to $4 trillion.  He argued that Bitcoin "is going to become the base layer protocol for the internet of value."

Is Bitcoin just a bubble? More than 80 fund managers researched by the Bank of America Corp. during the latest market plunge suggested that Bitcoin is a bubble. The results point to the distrust among some investment professionals on if Bitcoin is a feasible investment asset, given its extreme price swings and regulatory uncertainty.

Frights against bubbles in the crypto-verse are not something new. And many other investors have expressed their reluctance to invest in an asset that lacks fundamental support. 

Regardless of prices dropping, investment banks are still adopting the nascent financial model Goldman Sachs Group Inc. said it plans to roll out derivatives tied to Ethereum to clients, and Cowen Inc. outlined its interest to offer “institutional-grade” custody services for cryptocurrencies.

Also, renowned investment expert and veteran hedge fund manager, Paul Tudor Jones, emphasized his perspective of Bitcoin as a good hedge against inflation. In an interview with CNBC, Tudor Jones of Tudor Investment Corp. stated that, “I like Bitcoin as a portfolio diversifier,” Tudor Jones of Tudor Investment Corp. said in an interview with CNBC. “Everybody asks me what should I do with my Bitcoin? The only thing I know for certain, I want 5% in gold, 5% in Bitcoin, 5% in cash, 5% in commodities.” 

Tips on how to trade Bitcoin for beginners

As we said in the opening line of this article, Bitcoin is one of the earliest and most popular cryptocurrencies, therefore understanding how to trade Bitcoin is a skill that everyone should possess and apply. Some of the most important trading tips we can give you are as follows:

1. Keep up with the news:

Because Bitcoin is a new technology, there is a variety of news and articles that will keep you informed on a daily basis about what is happening in the bitcoin market. It is crucial for a newbie trader to stay up to date with Bitcoin news since it's critical to know what's going on with the cryptocurrency you want to invest in as it determines whether the price of that Cryptocurrency will go up or down.

2. Choose a secure wallet for storing your Bitcoin:

One of the most crucial tasks is to select an online wallet to keep your Bitcoin coins safe and away from hackers. When selecting the wallet where to store your Bitcoin, you should always be very cautious since there are many scams and phony wallets out there that will take all of your profits and investments as soon as you enter your personal information. Some of the most popular and secure wallets are Binance, Kraken, Exodus Bitcoin, and so on.

3. Minimize your expectations:

We always attempt to teach inexperienced Bitcoin traders to lower their expectations. This rule is critical if you want to become a successful trader because it allows you to keep your mind clear and invest wisely. If you have unrealistic expectations that you can become wealthy in a short period of time with Bitcoin, your mind will be clouded when investing and you will become greedy, making it more difficult to succeed in this field.

4. Choose a trading strategy

The final but not least thing you should be aware of before beginning to trade Bitcoin is to select a trading strategy. Trading techniques are always required, whether you are a novice or an expert trader. There is no one-size-fits-all trading method, but you may pick a trading strategy that works best for you. The greatest trading techniques we can propose are to invest in a range of cryptocurrencies rather than just one, to pick certain coins that you believe will earn you money, and to invest in the majority of them. Another piece of advice that most traders overlook is buying Bitcoin at a low price and selling it at a high price, rather than the other way around since most traders do not follow this basic and apparent guideline.

Bitcoin in 5 years

Many professionals have predicted what the value of Bitcoin will be over the next five years. Projections given by professionals like Paul Tudor Jones are backed with facts, and a clear understanding of how the market works. According to a variety of investors:

  • Winklevoss Twins: The infamous Bitcoin billionaires predict that by 2030 Bitcoin will be at $500,000, putting it at par with Gold at a market value of about $9 trillion. They have termed Bitcoin as Gold 2.0.

  • Anthony Pompliano: a Bitcoin bull and a co-founder at a crypto-friendly asset Management firm for crypto investors' states that Bitcoin will hit $250,000 by 2022 because of the rate at which Bitcoin has been accepted worldwide.

  • Morgan Creek, the chief of Capitals investment, predicts that Bitcoin's value could hit $250,000 in the next five years as it approaches the market value of gold, and this makes it market gold. His prediction is based on the fact that Bitcoin has hit $1 trillion in market evaluation in less than 14 years of its existence while market giants such as Amazon, Netflix, Apple, and Facebook took much longer.

Why will Bitcoin rise in value?

In the coming years, Bitcoin will circulate the market with unaffordable rates for ordinary investors. Bitcoin has created a dominant aspect in digital currency, and all its protocols are procedures used as a benchmark by investors and developers. Some factors are propelling its growth and market saturation, and they include:

1. Scarcity

Unlike fiat, Bitcoin has a limited supply of coins to ever circulate in the Market. The scarcity of the coin has created high market demand that improves the market stake. Bitcoin’s value is driven by the forces of supply and demand and its low scarcity is a key driver of its value in the long term. Bitcoin rewards paid to miners for verifying transactions on the Bitcoin network are halved every 4 years, cutting Bitcoin’s supply by half.

2. Technology

Bitcoin is underpinned by the robust blockchain technology. Blockchain is decentralized, secure and facilitates peer-to-peer transfer of value. Countries like China have heavily invested in blockchain technology despite cracking down on Bitcoin and cryptocurrencies. Blockchain’s increased use cases and robustness makes it a key driver of Bitcoins value. Its first successful use case was Bitcoin, and you cannot think about blockchain and leave Bitcoin.

3. Decentralization Aspect

Bitcoin is a decentralized digital currency; it means that any central unit does not govern it. The offer of financial freedom has been appreciated by many; freedom from trade barriers, government intervention, additional investments, and taking loans without liabilities are aspects that will keep bitcoin around for the long haul.

4. Social Media Presence

Social media and cable news platforms have brought Bitcoin into mainstream media, bolstering its adoption across the world. Most investors have known Bitcoin through social media platforms such as Facebook, Twitter and Telegram. Facebook itself has rolled out plans to create its own cryptocurrency to rival Bitcoin, although its plans were heavily criticized by regulators around the world.

5. The Commodity Market has Gone Digital

The recent Global pandemic has by far been one of the contributing factors for the online market's growth. Most products and services can be purchased and traded online; Bitcoin offers a digital mode of payment for each of these services. A partnership between Bitcoin and several online platforms like Amazon and eBay will contribute to profitable Bitcoin growth.

Read this to learn more about CFDs and how they work in the financial industry.

The downside of Bitcoin Expansion

The growth of Bitcoin does not come without its challenges; as observed in recent times, as the crypto market grows, enterprises and government organs are acquiring losses. Tax issues, for example, have affected government operations considering the decentralized nature of Bitcoin transactions. Governments have started legalizing cryptocurrencies and creating a framework for taxing crypto although it's still not comprehensive and clear.

Also, lately there have been discussions over the effects of Bitcoin on the environment. A few months ago, Elon Musk, the CEO of Tesla, tweeted that the company would no longer accept Bitcoin payments because of the effects of Bitcoin mining to the environment. Tesla, being a green energy advocate, suggested that Bitcoin miners use fossil fuels to mine Bitcoin, which harms the environment.

About the Author

Jonathan Clark is a content writer who primarily focuses on writing useful articles for anybody interested in learning more about blockchain technology and major cryptocurrencies such as Bitcoin, Etherum and Cardano.