When it comes to the latest cryptocurrency price movements, Frederick Munawa could very well represent the closet thing that we have to a crystal ball. While it can be argued that his strong educational background (particularly an NBA in finance from the University of Toronto) provides him with an edge, Mr. Munawa also possesses the ability to delve deep into the fundamentals.
This is why we decided to contact him, and to discuss some of the factors that affect the price fluctuations of Bitcoin. Let's see what he had to say on the matter, and what this might spell for the future of BTC.
Experts agree that halving events represent some of the most significant variables that have always caused an increase in Bitcoin value. We asked Frederick Munawa for a brief explanation.
"Think of this as nothing more than a typical case of supply and demand. When block rewards are cut by 50 per cent every four years, this creates a relative market scarcity. Assuming that other underlying fundamental conditions remain the same, the price of Bitcoin will naturally rise."
So, we can see that halving is a rather straightforward process. This is when the intuition of Mr. Munawa comes into play. He has taken the time to clarify three additional situations that can impact the long-term value of Bitcoin. Each of these will be discussed below.
It is important to remember that Bitcoin has evolved far beyond the initial white paper pushing for its use as a peer-to-peer payment system. This token (and many others) are beginning to become integrated into numerous point-of-sale platforms. Bitcoin can now be used to perform online transactions, to top-up cryptocurrency accounts, and to create a diversified investment portfolio. Assuming that more consumers become actively involved with BTC, its value should continue to increase. Conversely, a decline in demand could signal a more bearish outlook.
As a highly accredited journalist, Mr. Munawa is no stranger to the effects that can be caused by media hype. This is just as relevant when discussing the role that speculation may play in terms of Bitcoin valuations. What insight can he provide?
"I like to call public sentiment a 'crypto current', as even if technical indicators remain sound, an unexpected round of speculation can lead to massive price swings. If negative industry news suddenly emerges, selling pressure may increase. This will inevitably cause the value of BTC to drop within a short period of time."
What is interesting is that the news does not necessarily have to be concrete in nature. Even rumours may prompt a sell-off; particularly when related to regulatory concerns.
The good news is that this type of re-correction also represents a potential entry point for breakout traders. Those hoping to capitalise on a sudden re-correction before the prevailing trend continues may take advantage of such opportunities.
Mr. Munawa also makes it a point to stress the role that other cryptocurrency tokens may play; especially when considering the emergence of new investment opportunities.
"The market capitalisation of Bitcoin across the cryptocurrency sector was 80 per cent in 2017. This has now (roughly) dropped to just above 60 per cent. One primary reason is associated with the emergence of other viable altcoins such as Litecoin, Dogecoin, and Ethereum. As some investors prefer these options, it stands to reason that Bitcoin values will fluctuate in relation to the movements of competitor tokens."
This is one of the reasons why Mr. Munawa will frequently monitor the prices of other altcoins to predict how Bitcoin will potentially behave from a medium-term perspective.
We can now see that keeping up to date with the latest Bitcoin news can be rather challenging. Furthermore, other variables could also lead to price fluctuations. This is why we asked Mr. Munawa how average investors could remain one step ahead of the curve.
"It's always important to avoid becoming bogged down in short-term technical analyses. While these might be suitable for scalpers, the fact of the matter is that a sizeable portion of investors prefer securing longitudinal profits. In other words, try to develop a more circumspect approach. I also highly recommend partnering with a quality online trading platform that provides regular news updates, access to late-breaking industry information, and actionable insights."
Appreciating the nuances of Bitcoin will require time, patience, and experience. Still, the factors described above can exert a significant influence on future values, and they should never be overlooked. When these are combined with traditional techniques such as technical and fundamental analyses, it will become much easier to develop a well-rounded investment strategy. We also recommend following Frederick Munawa's online posts, as these will undoubtedly help to add another "string" to the proverbial bow.
