Bitcoin has crashed: should Russians invest in cryptocurrency?

November brought a sharp financial collapse in the value of Bitcoin and other cryptocurrencies. Meanwhile, many Russians are already considering investing in cryptocurrencies as a personal investment that could increase their wealth. For them, a sharp decline in Bitcoin's value threatens real financial losses. What are the reasons for the current cryptocurrency collapse, what might happen next for Bitcoin, and is it worthwhile for Russians to consider investing in crypto as a savings option? MK addressed these questions to financial analyst Mark Goykhman, an expert at ForexBY.

"A noticeable phenomenon in the financial world this week: the sharp drop in the price of Bitcoin and other cryptocurrencies," the expert said. "After the previous four months of growth to historical highs above $126,000 per coin, Bitcoin has collapsed in the month since the beginning of October to levels around $100,000."

- What are the reasons for such a collapse?

There are several. First, the strengthening of the dollar globally in recent weeks has had an impact. Cryptocurrency is, in many ways, an alternative to the greenback. And its dynamics, as a rule, are the opposite.

Secondly, Bitcoin is a "risky" asset in financial markets, responding to negative news with a decline. Paradoxically, the risk is currently linked to a positive factor—a significant rise in stock markets. This is largely due to hopes for the development of artificial intelligence. And in this area, there are risks of excessively sharp growth, inflating a price bubble. Recently, the heads of major Wall Street banks warned of the possibility of a stock price decline.

Thirdly, a key feature of cryptocurrencies has become apparent right now: their extremely high speculative nature. They lack the kind of real backing and regulation found in commodity, currency, and stock markets. Therefore, Bitcoin's price fluctuates much more rapidly and dramatically. Furthermore, this market is much more heavily leveraged, which is largely what fueled Bitcoin's rise to its highs. However, as the decline began, leveraged purchases began to close out abruptly. This accelerated the collapse.

- What are the financial implications of this?

"The consequences are obvious: a monthly drop in prices of approximately 20%. Let's compare: bank deposits in Russia currently yield around 15% per year. Here, it's 20%, not per year, but per month. And not a gain, but a loss... Although, for example, in September, Bitcoin rose by 18%, from $107,000 to $126,000.

- And what will happen to its price next?

- The rate is now likely to consolidate in the $99,000 to $107,000 range. However, the decline may not be over yet, as the trend has reversed from upward to downward. Thus, cryptocurrency has once again proven itself to be an extremely volatile financial instrument, susceptible to sharp price movements in either direction.

Meanwhile, many Russians view cryptocurrencies as a savings tool, a way to earn high income in a short period of time. Are they facing significant losses?

"In any case, they need to take into account the high volatility and speculative nature of this sector—it's very dynamic, less predictable, and very risky. This is ill-suited for most ordinary people seeking security and peace of mind in their savings. However, the cryptocurrency market may be suitable for those who are sufficiently prepared, don't use the bulk of their savings for crypto investments, and are prepared to accept increased risks and actively participate in this market."