The author Darian Jane *
Financial markets continue to be plagued by volatility and uncertainty those linked to cryptocurrencies are no exception.
The bitcoinsthe most important decentralized asset in the world, continues to decline day by day, month by month and already crossed the $16,000 downward barrierreaching levels not seen in more than two years.
Faced with such negative behavior, many investors and operators worry and lose money, but still wonder if it is a unique investment opportunity.
successes and failures
in 2018 December. bitcoin started a strong mid-term bull trend that caused millions to rejoiceas the cryptocurrency surged 2,109% to an all-time high in 2021. in November when it reached around $69,000.
However, the pace of growth was uneven. The positive explosion started in 2020. in the midst of a decentralized financial ecosystem that has expanded and expanded in part due to the pandemic. therefore, bitcoin has grown 565% in just over a year.
Unfortunately, all this euphoria disappeared as quickly as it came. From 2021 peak to the present day the dollar price of bitcoin has fallen by 77%.excluding the effects of inflation.
In this way, until now, it has been consecrated as the third strongest downward trend in the past decadebecause in 2018 decreased by 84 percent, and in 2014 – almost 87 percent
The prices of Bitcoin and other cryptocurrencies have been falling sharply in recent times due to various reasons, however macroeconomic scenario i.e which has recently happened to some brokers in this sector.
First of all, because from 2020 the issue of hard money by central banks caused inflation to skyrocket and spiral out of control, reaching all-time highs and values not seen in decades.
As a result, monetary entities themselves decided to start raising interest rates to absorb the excess liquidity, negatively affects risky assets such as cryptocurrencies and technology companies.
And as if that wasn’t enough, a few weeks ago the FTX scandal happenedin which the exchange experienced liquidity problems and eventually went bankrupt, destroying the reputation of many companies and investors in the decentralized space.
All this bad news caused volatility and panic among the participants who they are shedding their crypto holdings to move to more conservative assets.
But what’s happening with bitcoin is a case in point, as the asset appears to be shedding its volatility and consolidating on the path to the “new digital gold.”
It is impossible to know the future exactly, but it can be roughly predicted based on historical movements.
Typically, when an asset experiences a significant, near-exponential increase in demand due to very high demand, then its prices “normalize” in a certain area and explosive behavior is less and less significant and frequent.
When it comes to bitcoin, the first big bull run was in 2010-2011. and reached 99,300%. Then the price was corrected by 93 percent, but then it rebounded by 61 thousand between 2011 and 2013.
In this case, the next retracement was at 87% before a new bull trend emerged, and in 2017 it ended at 12,125%. This was immediately followed by an 84% down cycle ending in 2018, which saw the most recent 2109% revaluation.
As you can estimate, each positive cycle was smaller than the previous one, despite increased demand and mass adoption across the planet.
If bitcoin continues in this consolidation phase and investors accept its new state of low volatility and limited returns, it could be a new haven for value.
Unlike other common currencies such as the dollar or the euro, bitcoin cannot be continuously “spent” because its source code only allows for 21 million coins to be spent. units, no more.
With limited supply, inflationary pressures are removedTherefore, if demand increases, its price must inevitably rise due to scarcity.
For this bitcoin could withstand volatility in the future when markets are filled with fear and uncertainty, as is often the case in major crises.
Also, since it is a decentralized asset independent of any state or monetary entity, political conflicts and their consequences cannot affect it, which would enhance its quality as a haven of value.
Its growth potential and recent decline add to bitcoin’s appeal, always looking at the long term and attempts to avoid day-to-day fluctuations caused by investor emotions.
* Darian Jane He is an economist and editor with a master’s degree in business administration A global investor about CryptoDividends, CryptoInsider i.e Crypto War Room.