If youâve been a cryptocurrency investor for more than six months, itâs likely that youâll have already become rather numb to the news of Bitcoin crashes wiping upwards of 50% from the assetâs value in a matter of weeks. However, the latest series of price falls for BTC appear to signify that the assetâs widely anticipated second bull run isnât going to take place, leading
Despite Bitcoin and the wider cryptocurrency ecosystem only existing for around 13 years, crypto winters are nothing new either. Following Bitcoinâs 2016
Bitcoinâs most recent halving event in May 2020 saw the coin embark on a rally that ultimately formed a double top of $36,576.68 on the 14th of April and $39,044.77 on the 10th of November 2021.
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According to Bitcoinâs stock-to-flow model, the asset should have climbed to a value of around $100,000 at the culmination of its latest bull run. Due to the modelâs historic accuracy, investors had been left expecting BTC to rally further before entering another crypto winter, leaving many holders getting burned by the downturn.
Some onlookers are anticipating a harsh crypto winter.
Maxim Manturov, head of investment research at Freedom Finance Europe, believes that Bitcoinâs crash may be more pronounced due to the unprecedented volumes of liquidity arriving during the pandemic and then leaving the asset in recent months.
âItâs worth understanding the reasons behind the rise of BTC and other crypto assets, first and foremost the unprecedented liquidity in the financial system, which contributed to the rise of all risky assets on the planet, setting the stage for the subsequent imbalance in demand in the market,â
âTherefore, it is worth keeping in mind that the Fed will start to raise rates, cut QE and balance sheets to fight inflation, and in such an environment bitcoin could become more volatile and rebound attempts will be more moderate, there will be more competition for cash and therefore better opportunities for investors and a more realistic risk and reward environment,â Manturov added.
Playing the Long Game
Unperturbed by fears that Bitcoin has entered a prolonged bear market, ARK Investment Management, the firm led by Cathie Wood, has stated that the price of BTC may exceed
ARK added in its Bitcoin outlook that the cryptocurrency is taking market share as a global settlement network. According to data produced by ARK, Bitcoinâs cumulative transfer volume grew an astounding 463% in 2021, and its annual settlement volume overtook Visaâs annual payments volume.
Furthermore, Bitcoinâs technological advancements like the Taproot upgrade and Lightning Network may also help BTC to scale. Institutional ownership of bitcoin is also likely to grow, according to ARKâs findings.
âBitcoinâs market capitalization still represents a fraction of global assets and is likely to scale as nation-states adopt [it] as legal tender,â Yassine Elmandjra, analyst at ARK, claimed in the companyâs __Big Ideas 2022__outlook report, which was released in January. **
ARKâs findings show that itâs possible for the Bitcoin outlook to appear both bleak and full of potential at the same time.
Whilst it appears that weâre entering an extended bear market in which BTC will struggle to recapture its peaks from 2021, this period of consolidation may help to cool investor sentiment and allow institutions like PayPal, Visa, and many challenger banks the time to develop tools to deliver even greater rates of adoption and growth during the next bull run.
As for investors, their options appear clearer for the first time since before Bitcoinâs 2020 halving event. They can continue to hold their BTC through the winter, or cash out in order to catch the bottom at a later date - though this strategy relies heavily on Bitcoin acting in a predictable manner - something that the coin has been far too volatile to adhere to in the past.