1. BTC is behaving exactly as it should.
After hitting an all-time high of $68,521 just one month ago on 5th November 2021, BTC has been on a decline since even losing 20% of its value since the ATH at some point.
In its decade-long history, Bitcoin has crashed more than 80% on 3 different occasions since 2012. The current 20% decline, therefore, pales in comparison to what the cryptocurrency has gone through in the past.
For investors keeping the long-term view in mind, these minor crashes are just mild upsets on an otherwise upward trajectory for the decentralized crypto coin. The crashes have a predictable pattern that has previously been mostly triggered by global geopolitical events.
A major crash for instance happened in 2018 when South Korea and Japan both threatened to ban BTC, the same as the crash that was precipitated by the Chinese government imposing strict sanctions on the cryptocurrency.
This past weekend, the geopolitical event that we can ascribe to the current crypto crash is the announcement of the newly discovered COVID-19 Omicron Variant. Investor sentiment has been dampened by the announcement, coupled with a general uncertainty regarding regulation in the sector.
Investors have withdrawn their money, out of panic, and re-allocated them to less risky investment vehicles like currencies, oil, and gold. The recent Omicron Variant announcement is reminiscent almost reminiscent of March 2020 when the global COVID-19 pandemic was announced. At that time, the global markets, including cryptocurrency markets saw a general downturn, not unlike what we are currently experiencing.
2. Anything Casting Doubt On The Future Of Crypto Will Trigger A Price-drop
Anything that seems to put in doubt the future of the cryptocurrency markets will always result in demand for BTC dropping. A reduction of demand then sees a drop in the price of the cryptocurrency, as both institutional and retail investors temporarily pull back.
Bitcoin has always found a way to bounce back, especially in years following halving-event years. The last halving happened in May 2020. As such 2021 was always going to be an excellent year for BTC in particular and cryptocurrencies in general, perhaps explaining why BTC breached a new ATH.
As mass adoption and demand for the crypto coin grow immediately following halving events, so does the price of the cryptocurrency, considering only a fixed number are in circulation. As long as mass adoption continues to grow, the price of BTC will always go up. Any temporary crashes happening in the course of that journey, like this one, should be treated as such; temporary.
Halving events have always previously catalyzed BTC prices. This will only continue to be the case if history is any indication.
3. Decentralization is a Double-Edged Sword
The lack of a centralized authority on the BTC blockchain is simultaneously the reason for the astronomical highs and the distressing lows of its price. Unlike in a centralized government-controlled market, users in the crypto markets have nobody to protect them in the event of a crash.
When the demand for a cryptocurrency falls, central banks cannot step in to limit supply or to set prices, as they normally would. Only the forces of market demand and supply are at play within the crypto markets.
Such decentralized networks simply have to ride out the stormy seas of demand and supply. To make matters worse, it is during the downturns that panicked users will typically sell, caving the price of the cryptocurrency even further.
The current downturn is indicative of investor pessimism both due to the Omicron Variant and due to the potential assault on the decentralization of cryptocurrency markets by possible government regulation.
Over the long arc, however, all indications point to Bitcoin continuing to grow in popularity amongst the masses. Decentralization and blockchain technology is a potent combination as it grants every individual autonomy over their own financial destiny. Demand for cryptocurrencies and blockchain technology will only continue to increase in the future, which will reflect in the prices of tokens and coins.
4. Crash Notwithstanding, Things Look Good For Crypto
Institutional investors are gearing up to get into cryptocurrency positions in a big way. On-chain analytics indicate several large recent transactions from whales currently buying into the dip. Known whales like El Salvador have also recently bought the dip majorly.
This is perfectly in order, as common investor knowledge would suggest the current crash as a perfect opportunity to increase one’s holdings. Such whales however typically end up moving their BTC and ETH holdings off the exchanges to safer cold wallets, for obvious security reasons.
Central governments and their institutions are also becoming alive to cryptocurrencies becoming valid competitors to traditional fiat currencies. This will likely drive adoption by the central government, either as an act of following the markets or to attempt to come in and regulate the sector.
The regulation of crypto markets is not entirely good news, as it goes against the core crypto ethos of decentralization. On the other hand, regulation is likely to be the signal that banks, large financial institutions, and financial services companies are waiting for, to get into the sector, which will steer major growth.
5. BTC Might Pull Together A Bull-Run Into 2022
Bitcoin has historically surprised the markets. It would not be surprising, therefore, if BTC puts together a bull run going into the end of the year and into 2022, fueled primarily by institutions getting into crypto en masse.
There is also increasing conversation about bridge technology, as a way of moving cryptocurrency assets between Layer 1 protocols. Every day, it becomes a little more clear that we will end up in a multi-chain world. Bridges will therefore emerge as the leading theme within leading cryptocurrency ecosystems, further driving the growth of the sector.
Investment into crypto takes a collective belief that blockchain technology is here to stay. Bearing this in mind, any position you take must therefore not be swayed by crashes that will definitely happen on the cryptocurrency’s upward march.
For a growing asset class like Bitcoin, volatility is a feature rather than a bug. It is just what comes with the package of a high growth rate asset. Couple this with a recent upgrade of the BTC network increasing its utility, and you have yourself a growing long-term asset that is far from being done.