Over the past few months, Bitcoin has remained relatively stable in the $50.000 area. The latest “hit” came earlier this week when Elon Musk announced that Tesla will be suspending Bitcoin gateways to pay for their cars.
Now investors are confused, wondering if this is a golden opportunity to buy bitcoin at low prices, or if this is simply the beginning of a freefall. In this article, we will analyze the possible scenarios that could play out after the market finds some stability.
After reading this post, you should be able to adjust your investment strategy based on the opportunities that you see most likely to occur.
New investors choose to invest in Bitcoin for the fast and nearly certain returns. But instead of getting rewarded, they see coins with no fundamentals pumping all across the board (did someone say Dogecoin?) Now, apart from this, we are starting to see a breakout in the ETH/BTC pair, which signals the possibility of Ethereum making a new all-time high in the Bitcoin pair.
All the news at the moment seems to be more favorable towards the future of an on-chain world, and all the applications that aim to support it. Apart from watching the price of Ethereum rise steadily over the past few months, we also noticed DeFi projects growing massively. Small to large caps, these projects seem to bring fresh energy into the crypto space and, by all means, outpace Bitcoin for the time being.
Bitcoin maximalists and passionate influencers have long been laser-focused on Bitcoin, disregarding everything else the market has to offer. But that has not played out well over the past few months. Investors have lost lots of opportunities to earn a decent amount of money by sticking to Bitcoin in a religious manner. Right now, even though many indicators point towards a continuous drop in price, they keep on preaching of the money-making potential and the strength it holds as a store of value.
In many ways, BTC maximalists could be considered as angry for missing the opportunities of the market. And while Bitcoin stays within a 20% price range, short-term traders seem to be getting higher rewards than their long-term-holder counterparts.
There are really three scenarios that could play out right now, and none of them gives us a specific price indication. However, note that these scenarios only affect the short-term price action. In the long term, we are nearly certain that Bitcoin will continue to grow with each consecutive halving. That said, here is what we think about the short-term future:
New institutions announce their support for Bitcoin, by purchasing the coin with their treasury reserves. Mark Zuckerberg recently published a “cryptic” tweet to indicate his support for Bitcoin, which makes us think that many companies are simply not allowed or incentivized to reveal their positions.
Is Mark Zuckerberg telling us he is a bitcoin maximalist with the names of his goats? 👀 pic.twitter.com/GKlMdqdeXJ
Based on this scenario we could eventually see an array of “revelations” from institutions and countries, where they announce their support for Bitcoin in their own way. Obviously, such events will cause a spike of interest which could help the price of Bitcoin to continue pushing the price model of Plan B, known as the Stock to Flow Cross Asset.
The second scenario is one where the crypto market continues to grow while Bitcoin loses its dominance. In this case, we could see the popular cryptocurrency hover in the $50-$60 thousand dollar area, while the rest of the market grows. Eventually, Bitcoin would catch up, but not after the first Ethereum outranks it as the biggest cryptocurrency by market cap. This scenario may seem highly unlikely to most but is actually quite realistic.
Finally, let’s briefly discuss the bearish scenario for Bitcoin. As we mentioned in the previous section, there is a real possibility that Bitcoin loses its “throne” to Ethereum, the most active blockchain in the space at the time of this writing.
If this shift in market dynamics occurs, it is very likely that we will see bitcoin lose steam, and possibly another coin passing it in terms of market cap as well (Doge?). This scenario could be catastrophic for Bitcoin as it will negatively affect its use case as a store of value, and its main feature as the most liquid coin in the market. Of course, in the long term this is still somewhat irrelevant, as Bitcoin is still the most decentralized cryptocurrency on the internet.