You don’t have to be a genius to know that the price of Bitcoin right now is not up to scratch. Apparently, he doesn’t have enough strength to climb. And, to add insult to injury, it rests on rather flimsy supports. Many investors are waiting, because the forecasts are not very encouraging. At the moment, we cannot trust the eternal bulls. Because the eternal bulls are not objective. They are always bullish. Ideology blinds them. They were bullish at $68K. They are bullish now. They are always bullish, because Bitcoin, for many, has become a faith. The investor, however, is forced to be more objective. When the priority is our pocket, ideologies and infatuations must take a back seat.
The investor’s goal is to grow financially. And, to achieve this, you must buy low and sell high. That means he buys, sells or holds based on an expectation. Now, identifying the fair price of Bitcoin is not an easy task, because it is a non-productive asset. However, we know that sentiment and macroeconomic conditions play a key role. Bitcoin is a risk-on asset. In other words, it is a speculative asset. I know very well that the words “risk” and “speculation” do not sit very well with orthodoxy. But here the intention is not to offend. What is sought is to call things by their name.
What is Bitcoin? Well, Bitcoin is a code in a database. It is a series of numbers and letters on a computer network. It is not a farm. It is not a company. It is not metal. It is not a cereal that can be eaten. Bitcoin is a code. Y that code represents a rate of change for a community. I mean, that code has a price.
Why are there people willing to pay for a code? Some by ideology. There are many liberationists, anarcho-capitalists and conservatives who use Bitcoin as a citizen currency to emancipate themselves from governments. Others for convenience. They use technology to move capital and avoid friction. And others for investment. It is assumed that the price of Bitcoin will rise as more people join the movement. In other words, you buy today, expecting a better price tomorrow. And a better price is possible with an increase in demand.
That increase in demand depends on two things: People and liquidity. People unite thanks to greed. If people think the price will go up, they buy. And those same purchases are what drive up the price. Ultimately, it is a self-fulfilling prophecy. Of course faith needs promises. And, for many years, the narrative has been the promise of the arrival of institutional capital. Bitcoiners are more foolish than an Herbalife seller, because they know that promotion is necessary to encourage investors. For this reason, every tweet is bullish. For this reason, every bitcoiner seems to be on a permanent campaign. For this reason, predictions are always optimistic. And that is why they promise more than a candidate for the presidency of the Republic. The baker always wants to sell his bread. The Bitcoin community always wants to raise capital.
In the last quarter of 2017, markets got a big boost from Trump’s tax cut package. The price of Bitcoin reached $20K thanks to all the anticipation generated by the CME group’s Bitcoin futures. But already by the first quarter of 2018, there was talk of a general overvaluation in the markets. The year 2018 was not a very good year for the markets. Trump’s tariffs caused a lot of uncertainty among investors. The United States Federal Reserve (Fed) raised interest rates four times that year. And regulators began to demand greater scrutiny for the Big Tech and crypto sector. This created a climate of skepticism around Bitcoin and cryptocurrencies that was eventually reversed during the pandemic period due to Fed stimulus. This is key.
In March 2020, the price of Bitcoin plummets thanks to fears around the pandemic. That crisis lasts two months and the price starts to rise due to the Fed stimulus. From March to December (2020), the price of Bitcoin increased 4X, placing again near the all-time high of 2017 ($20K). Then, during 2021, the price increased 3X reaching the all-time high of $68K. 68 thousand is the number we managed to reach after the largest liquidity injections in history. You could say we’ve had a two-year run under ideal conditions.
Now, after a monetary shift by the Fed, the gains of 2021 have been erased. Today we are struggling to stay above the all-time high of 2017. This decline began in November 2021. That is, in 8 months (+/ -) we lost 70%. Now the problem is that to recover we require more than 300% magnification under much more difficult conditions. In this opportunity, we have fewer people and we have less liquidity than before. People are hit by the collapse of prices and the insolvency of many platforms. The sentiment has changed significantly. And the liquidity is not the same, because the Fed is raising rates and shrinking their balance sheets.
In such conditions, it is not very sensible to assume that Bitcoin will achieve a 300% increase in 6 months. We didn’t make it during the bull run with stimulus everywhere and sentiment through the roof. Asking the same thing in much more hostile conditions would be too much. Also, it’s summer and summers are generally lazy. In fact, hopelessness could take us to lower levels. We cannot rule out that possibility. Which implies that it is not necessarily the time to sell. But It is also not the time to buy crazy. Suddenly, it is a good idea to wait a while until you find more clarity. In times of uncertainty, liquidity and stability represent a great advantage.
The last quarter of the year does promise us a break. It is not totally unreasonable to assume that during the last months of the year the macroeconomic situation will gain more stability and that optimism will begin to be reborn. This assuming, of course, that we won’t be in for any big surprises along the way. In the case of unexpected events or setbacks that are too big, all bets are void. Now, counting on the most “predictable” scenario, thanks to this respite, the price of Bitcoin could improve. $25K? $28K? I do not know. It all depends on the summer and the floor that is achieved. In summary, with the information we have today, we could forecast a summer between pessimism and mediocre. And a last quarter between neutral and optimistic. Note that this should not be taken as a prediction. The healthiest thing is to use these forecasts as references when making decisions. What will be, will be. Let’s just hope that the surprises are more positive than negative.
Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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