Bitcoin has generated great returns for some investors but its highly volatile nature undermines its ability to become a regular part of corporate treasuries. Bitcoin’s infamous volatility resurfaced on January 10, 2021, when Bitcoin plunged to more than 25% in just 24 hours.
As the crypto market cap plummeted below a trillion to $823 billion, the Cryptocurrency marketers incurred heavy losses. Ethereum, which is another very popular Cryptocurrency, lost significant value as well by sinking down to 27%.
An important point to note here is that several investors expressed their trust in the digital currency by making hefty investments in it last year. An investment of $425 million of its $500 million cash was made by MicroStrategy Inc. In December 2020, Michael Saylor of MicroStrategy Inc. again invested $650 million of his company’s cash into the digital currency.
Square Inc., headed by staunch crypto advocate Jack Dorsey, also invested about $50 million of its total assets into the token. Bill Miller of Miller Value Partners predicted that it would soon become a trend across Main Street Market.
Now that Bitcoin is seeing the largest price dive of the year, its chances of becoming a regular part of corporate treasuries seem really bleak. However, the advocates of Cryptocurrency, like Michael Saylor, don’t seem too discouraged by Bitcoin’s latest debacle. In his latest tweet, Saylor was again seen promoting Bitcoins for Corporations.
In the month of December, last year, Elon Musk also inquired about putting Tesla’s cash into the coin but on being warned by the industry experts, he took a step back.
Market experts point to the fact that when Bitcoin performs poorly, it does not have enough to finance its working capital requirements. Therefore, investing most of your cash into a currency like this is not a good idea.
Besides being volatile, Bitcoin is replete with risks, such as – Cryptocurrency frauds, forgotten passwords, and hackers.
Despite all the risks, there are many who are still advocating Cryptocurrency. Scott Minerd of Guggenheim Investments predicted Bitcoin’s worth to be $400,000 in the times to come. JPMorgan Chase & Co. sees long-term potential in the coin and expects it to reach $146,000.
In a note to investors, Simon Peters, an analyst at Etoro explained that crypto markets are still in a healthy position and there is no need to lose faith in the coin so soon. There may be bumps along the road but there are many gains that are yet to be achieved.