In the cryptocurrency market, there are numerous theories that investors use to explain changes in the price of Bitcoin (BTC) and attempt to predict its future movements. Some of these theories have proven their accuracy and effectiveness over a long period of time. However, the current market cycle has brought significant changes to the familiar landscape, prompting participants in the crypto industry to reconsider their understanding of what is happening.
Content:
- BTC price is held above the historical peak of the previous cycle, without dropping below
- Bitcoin: the best tool for protection against inflation
- It is forecasted that BTC will maintain its cyclicality, repeating every four years
BTC price is held above the historical peak of the previous cycle, without dropping below
Throughout the entire history of Bitcoin, the price of this asset has never fallen below the previous all-time high. This theory has proven itself during several past bear markets. That is why many investors believed that the price of BTC would never drop below the $20,000 mark.
The first drop of BTC below $20,000 in 2022.
However, the prolonged crisis in the cryptocurrency market has pushed Bitcoin to new uncharted territories.
In June of last year, the price of the leading cryptocurrency fell below the historical high of $20,000 from 2017 due to panic selling triggered by the collapse of the Terra ecosystem and the decrease in the value of LUNA and UST. In November, the price reached a new cycle low at $15,649 following the crash of the well-known cryptocurrency exchange FTX.
Despite some market participants claiming that without the intervention of random and unforeseen events known as "black swans," the theory would still be relevant, one cannot deny the obvious fact.
Bitcoin: the best tool for protection against inflation
Bitcoin is often compared to "digital gold" due to its ability to store value, similar to physical gold. However, in recent years, doubts have arisen among investors regarding this claim. The impact of the COVID-19 pandemic, as well as the rise in inflation in the United States to the highest levels in the last 40 years, led to a significant decrease in the value of the primary cryptocurrency, by approximately 70%, and it began to demonstrate correlation with the stock market, particularly the technology sector.
In 2022, the correlation between BTC and the S&P 500 index reached a new historical high.
The situation, however, is gradually beginning to change. Here are a few factors that are bringing about these changes:
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Banking Crisis: The collapse of major traditional financial institutions such as Silicon Valley Bank and Signature Bank is drawing investors' attention to Bitcoin.
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Erosion of Trust in the Dollar: People are becoming uncertain about the dollar and are considering digital assets as a way to move away from the fiat system.
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Bitcoin Reevaluation: Bitcoin is once again becoming attractive to investors, particularly after the banking crisis and doubts surrounding the dollar.
These factors support the theory that Bitcoin may become a viable investment asset in the future.
It is forecasted that BTC will maintain its cyclicality, repeating every four years
One of the most common misconceptions about Bitcoin is the belief that its price moves in four-year cycles tied to the halving events and begins to exhibit parabolic growth roughly six months after each halving. Indeed, such tendencies have been observed thus far. However, when Bitcoin's issuance becomes so low that the rewards for miners are nearly negligible, the situation may change significantly.
One of the controversial points is that the halving has become such a popular phenomenon that all participants in the cryptocurrency market are preparing for the upcoming event scheduled for April-May 2024. This means that major investors will actively buy Bitcoin in hopes of significant profits. The table below presents the key participants and their positions regarding the halving:
| Participant | Halving Position |
|---|---|
| Large Investors | Plan to actively buy Bitcoin before the halving, expecting an increase in its value. |
| Miners | Preparing for the reduction in block rewards and assessing their expenses and potential profits after the halving. |
| Traders | Analyze the market and expect changes in the price of Bitcoin due to the halving, planning for active trading. |
| Enthusiasts | View the halving as an important event that can generate increased interest in Bitcoin and market development. |
| Regulatory Bodies | Closely monitor the halving and its impact on the cryptocurrency market, considering the possibility of introducing new regulations. |
Each of these factors has the potential to significantly impact the price of BTC and alter the familiar course of events. As a result, even this established theory will ultimately lose its relevance.
