In recent days, the price of Bitcoin has surged to the point where it’s within touching distance of its all-time high of $20,000. However, after watching the market for the cryptocurrency soar in December 2017, only to crash a few months later, can we trust that the Bitcoin price is stable and should we be investing?
For those of you who have been living under a rock (or if you don’t have annoying friends that are obsessed with the future of digital currencies), Bitcoin is a digital currency traded on a distributed ledger (a.k.a. blockchain) that makes transactions immutable. Since it was created by an anonymous figure operating under the pseudonym Satoshi Nakamoto in 2009, Bitcoin was created in response to the 2008 Financial Crisis as a digital alternative to the current financial system, which has some fundamental flaws that led to the crisis.
Without boring you with the details, fast forward from 2009 to 2017 and Bitcoin transforms from a practically worthless collectors item to a untraceable form of payment used frequently on the dark web (Silk Road) to engage in illegal online activity to an incredibly valuable currency that looks like it has the potential to cause the degree of disruption that Satoshi Nakamoto dreamed of over a decade ago. Companies that are using the blockchain technology that underpins Bitcoin are popping up all over the show and, as we headed into 2018, it seemed that the Bitcoin price was only going up and blockchain technology would be revolutionising the world in a manner that could only be comparable to the creation of the Internet.
However, after the Bitcoin price flirted with the $20,000 threshold, it fell from $19,650 in mid-December to $15,075 less than a week later. A year later, the Bitcoin price fell all the way down to just over $3,400. After that drop, the price rose back up to beyond the $10,000 mark about half way through last year and suffered through more turmoil through to 2020, where it hit a low of just over $5,000 in March.
COVID-19 and the global migration to working remotely, shopping online, coupled with growing confidence in the market and Bitcoin’s potential to actually work and fix the suffering global economy, has seen the Bitcoin price pick up at a staggered rate, surpassing $13,000 at the beginning of October. November, however, has been extraordinary. At $13,571 on 30 October, the Bitcoin price rose to $19,333 just yesterday – less than $300 shy of its December 2017 record-high. However, overnight the Bitcoin price has dropped by more than $1,000 after a drop in trading on the Asian markets, as reported by Reuters. And, naturally, most people will be expecting the promising digital currency to suffer another major hiccough and our annoying friends’ big dreams about toppling the global financial system will go up in smoke again. But what do the experts say? Could things be different this time? Will Bitcoin break the $20,000 barrier and stay there? Would now be a good time to buy?
“I’m expecting this bull run to end this month,” YouTuber Tone Vays told Forbes’ Benjamin Pirus. “It’s possible that it has already just ended, but I’ve been saying for the last ten days or so, that this bull run should end in November or early December, but I’m not expecting a bear market.”
Bull runs represent periods of significant price rises. Runs or trends can rely on context and vary based on different time horizons. Just because the Bitcoin price may drop significantly for a period of time after an exuberant rally does not necessarily mean the asset has entered an environment where markets lose interest in the digital asset permanently. And markets typically work in waves, with major upswings and smaller pullbacks. They are often characterised by higher highs and higher lows, meaning that the price increases steadily over time, regardless of the major losses experienced during downturns.“I’m expecting either significant consolidation or most likely a pullback to the $14,000 to $15,000 area over the next few months,” Vays explained. “Then, it’ll take another month or two to get back to $20,000, and I am expecting the break of $20,000 around the end of Q1 of next year, so maybe March or April is when I’m expecting the break of the $20,000 area, and then we go up quickly.
That’s my current outlook, but it can change tomorrow.”
Meanwhile, Brian Krogsgard, a trader and podcaster, has said that the current market is favourable for Bitcoin.
“In my mind, the bitcoin bull run began in July of 2020 with the break of consolidation around $9,200 and confirmed it by holding the 20-week moving average at $10,400 in September,” Krogsgard told Forbes.
“Many market participants are willing to wait for new highs and price exploration to participate. We have now run very hot, and are due for a substantial mean reversion — which would be a big buy on dip opportunity; the macro environment favours bitcoin greatly.
“I expect we can see at least one year of price exploration in this cycle, and I want to maintain significant bitcoin exposure at least until $50,000.”
So for the layman, the answer to the question about whether you should buy Bitcoin at its current price is perhaps a tentative “no”, in my opinion. There’s still a lot of uncertainty in the market, but it is growing in popularity. Right now, it’s likely we’ll see the price surge slow down, if not reverse. But, six months from now it could explode again, for those willing to stay in the market for the long-haul… exercising patience, however, when you see the value drop, is a different story and has been more than enough to put most investors off in the past.