The 2022-2023 Bitcoin (BTC) bear market was tough. As someone who held bitcoin during the 2018-2019 bear market, this one was just as painful, albeit a little shorter and the drop less dramatic than the last.
The fact that the investment amount was larger this time may have been the reason why I felt the difficulty. Or maybe it’s because the mainstream media’s hopes for more factual reporting have been dashed. Unfortunately, I had to worry about the same issues as before: regulation, quantum computing, and environmental impact.
Anyway, I’m happy to see the end of this bear market in sight. Nothing is certain, but 2022 to 2023 barring some surprising negative developments, such as when Bitcoin crashed on March 13, 2020 in the wake of the COVID-19 pandemic. The 2020 Bitcoin bear market is probably over. Here’s why.
Reasons for the end of the bear market
Nearing half-life: The halving that slows down the issuance rate of Bitcoin happens about every 4 years. Both of the last two halvings have been major triggers for bull markets.
The reason is simple. If demand for holdings remains constant, downward pressure on supply will cause prices to adjust upwards. Demand and supply always determine the price, and the less supply, the higher the price. Less than a year until the next half-life.
Mr. Ichime is not here: Whenever a halving-triggered bull market kicks off, there is a flood of traders trying to catch the momentum. Traders rush to see bitcoin price rise. This creates a bubble that is eventually washed out of the market months after its peak.
As you can see from the average Unspent Transaction Outlet (UTXO) time, we are already past the washout point. There are no first-timers who are attracted by price increases, and long-term holders (HODLers) remain.
Bad news doesn’t cause new lows: Crypto assets saw a lot of bad news last year. It also affected the Bitcoin price. Terra, Three Arrows Capital, Celsius Network, BlockFi, Voyager Digital, FTX and others went bankrupt.
This year, however, the Genesis debacle and concerns over Digital Currency Group (DCG), Grayscale and Binance did not drag Bitcoin to new lows. Those who sell on bad news are already out of the market.
the cycle repeats: At some point Bitcoin will exit the four-year price cycle. Until then, repeat “deja vu”.
During the 2014-2015 bear market, bitcoin hovered around $350 before finally dropping to $200, where it remained for many months. During the 2018-2019 bear market, it hovered around $6,000 before finally dropping to $3,200. The 2022-2023 bear market will hover around $28,000 before dropping to $16,000. It stayed at that level for months.
Bitcoin’s price thus repeated its past pattern of peaks, months of stagnation, and eventual declines of more than 40%.
What will happen in the future? I won’t make any short-term price predictions here, but if the 4-year cycle repeats itself again (which I think it will), here’s what happens:
It will never be $16,000 again: Two cycles ago, Bitcoin price recovered from its final low and never fell again. A cycle ago, it was about to return to lows, but that was due to a massive drop due to the coronavirus outbreak. With less than a year until the next Bitcoin halving, it is highly likely that the Bitcoin price has bottomed out, barring any unexpected events.
Not subject to regulation: Bitcoin has proven to be relatively immune to pressure from regulators. It has long been clear that Bitcoin is a commodity and not a security.
As far as I know, even the most militant US Securities and Exchange Commission (SEC) chairman, Gensler, has admitted that there is only one crypto asset that is clearly a commodity (i.e. not a security). there is Bitcoin, of course.
With Gensler as chairman or not, the SEC will likely maintain its stance that most crypto assets are securities. But those risks are completely irrelevant to Bitcoin.
Very few financial advisors and institutional investors invest in bitcoin: From my experience with Swan Advisor Services, I believe that financial advisors and Swan clients invest very little in Bitcoin.
In previous cycles, such a stance could be excused by a lack of rational product or regulatory risk. In the broader cryptocurrency market, these issues are largely unchanged. But when it comes to Bitcoin, the problem is mostly solved. Therefore, we expect financial advisors to adopt Bitcoin significantly in the next bull market.
So what should we do next?
It would be a good time to learn about the benefits of including Bitcoin in your investment strategy. Bitcoin bear market is the best time to buy bitcoin. The end of a bear market is also the perfect time to add some truly unique assets to your diversified portfolio. The next Bitcoin bull market is probably just getting started.
*This article is for educational and informational purposes only and is not financial advice.
｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
| Image: Hans-Jurgen Mager/Unsplash
｜Original: Bye-Bye Bitcoin Bear
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