Is Bitcoin Declining or Inclining?
My short take on the market situation
It is an open secret at this point as to how the financial market especially its crypto faction has been particularly rough on traders and investors alike. In this current bear market, we have witnessed a lot of financial institutions and people over the past months openly claim bankruptcy with most admitting to have suffered significant losses due to the harsh climate of the market. Is the worst over? Or have we only just begun? let’s dig in and find out, shall we?
BTC Roadmap
To idealize what to expect from the world’s most popular decentralized currency, let’s take a short trip down memory lane to see the events has unfolded so far;
At the beginning, of 2010, you could buy one Bitcoin for $0.09, from January 2011 to Dec 2013, BTC experienced an uprise from $0.30 to $946.92. The price of Bitcoin then got bearish till September 2015 with the price dipping to as low as $227.35. From then till December 2017, Bitcoin experienced another wave of bullishness, pushing the price to $10, 859.56, then came another bearish Bitcoin season that lasted till March 2019 with the price dipping to $3,850.07. It was not until May 2019 to November 2021 that we experienced another bullish cycle where the price moved from $5,423 to its current ATH(all-time high) at $69,045. From then till now(September 2022) it’s safe to say we’re in another bearish cycle with the price dropping significantly to as low as $17,629.76 three months ago.
Now that you’re caught up on how where we’re coming from, let me briefly walk you through some of the driving forces I believe to be behind Bitcoin’s recent struggle regarding its inclinations and current decline;
BTC Halving
“Halving as in cut in half?”, well yes! you are correct. Bitcoin halving means exactly how it sounds, it is the splitting of the total amount of mined Bitcoin half. The miners who are major players in this aspect earn through rewards, which in turn dictates the inflow of new bitcoins in circulation. With each halving, these rewards are split in half and the inflow of new bitcoins reduces. The aim of this is to reduce supply and increase demand which worked like a charm starting from the first halving which occurred on 28th November 2012 when the circulating supply was 21 million, and the miners earning rate reduced from 50 BTC per block to 25 BTC per block, moving price from $11 to $1,217.
The second halving took place on 9th July 2016 after which the earning rate of miners from 25 BTC per block reduced to12.5 BTC per block, moving the price from $647 to $19,800. The third halving happened on 11th May 2020, after which the earning rate of miners reduced from 12.5 BTC per block to 6.25 BTC per block, significantly pumping the price of BTC to its current all-time high (ATH) at $68,789. Bitcoin is also a deflationary currency with its maximum supply at 21,000,000 BTC and its current circulating supply which is at 19,143,300 BTC which sums up to 91% of its max supply still actively available in the market. Interestingly, there are many traders with the belief that only the approach of a Bitcoin halving event, guarantees the coming of the next bull run.
BTC Whales
The financial market is no doubt a heavily manipulated space largely due to the effects of its biggest investors. The “Crypto whales”. as most call them are known to be the largest market investors in the crypto world and are feared for their ability to make “market moving” decisions, meaning they are capable of causing significant changes in the price of assets they’re vested in. The logic is quite simple, the crypto market is heavily based on supply and demand and the crypto whales utilize this knowledge by dumping an asset to a more discount(lower) price baiting smaller investors as exit- liquidity then buying it up again to a premium(higher) price, why? Because they can afford to! Here’s how it works, having a larger amount of money than most people permits you the luxury of having more purchasing power in an asset, so basically, the more money you have invested in an asset, the more influenced it will be by certain decisions you make. It also can’t be ignored that the whales are also the largest losers should the asset or project crash.
BTC vs The Media
Having “media power” in this 21st-century age is everything in the crypto world. Social media has proven to be one of the primary sources of information for most people largely due to its faster and wider reach to the public. Projects are known to utilize media outlets to influence the sentiment of investors either to reassure them in a crisis or warn them of impending danger to the project community. Market sentiment has proven to be one of the strongest forces of major market moves, causing assets to rise and fall, the truly scary part is how it is usually not based on well-proven facts but on emotions such as fear, greed, and other emotions that come with being human and this usually results in panic in the market with traders and investors making irrational decisions.
As of the time of writing, Bitcoin’s fear and greed index currently sit at 23, which is an extreme fear region. A typical example of how much influence and sentimental decisions one can spark up in the market was when Tesla, SpaceX, and Twitter CEO Elon Musk announced on his Twitter page informing the public that the company(Tesla) would no longer be accepting payments in Bitcoin owing to the large energy consumption of Bitcoin in the mining process and its environmental impact. His tweet alone because of his high social standing and media presence caused widespread panic among investors, sending Bitcoin into a downward spiral from $56,300 to less than $30,000. Many people blame this event as one of the catalysts that influenced the current bear market.
BTC vs Economic Inflation
“How much of an effect does inflation have on Bitcoin?”. First off I’d like to remind you that Bitcoin is a cryptocurrency rather than a fiat currency, though they’re both similar in the sense that they’re both not backed up by a physical commodity, that’s about where it ends. Many crypto enthusiasts see BTC as an anti-inflation asset because of the storage value security of funds it brings when fiat currency inflates when local currency. For example, if the dollar starts showing significant signs of weakness, people have the option of converting their cash to Bitcoin or other cryptos to preserve purchasing power, which will in turn make Bitcoin more valuable. Although no concrete data is backing how Bitcoin would be affected by economic inflation due to how during the little over ten years tenure of Bitcoin so far, major economies have experienced only a little amount of inflation occurrences. Assuming Bitcoin had existed before the great financial crisis of 2007–2009 for example, that would have surely helped analysts have more data to determine what to expect from a future occurrence.
Is BTC doomed?
The ongoing market situation has given traders a lot to think about what steps to take next. Some traders, especially those who were not part of the bullish train when the coin was still relatively cheap and pumping are seeing this dip as a second chance to hop in on what they believe to be a merry-go ride upwards to a new ATH, whilst some have abandoned ship selling off what remains of their Bitcoin portfolio at a loss or break-even out of fear of capitulation. Personally, I’m indifferent about whether or not BTC will further dump or pump because I suffered some hits myself from this harsh market condition but once again, losing is a part of the game and what truly matters is learning from it. A lot of top-tier traders have openly been airing their views on what they think could be the future of Bitcoin via their charts and strategies, though it is clear that they’re all but speculations that may or may not turn out to be true. Either way, I highly suggest that now more than ever, investors and traders should take proper steps in ensuring they make “financially wise” decisions when approaching the market and take disciplined measures to check that they are only trading or investing with an amount they’re comfortable enough to lose to checkmate unhealthy mindsets such as fear and anxiety. I wish you a safe and profitable financial journey ahead.
Thanks for reading!