Bitcoin Prices and Adoption Offer Interesting Contrast
VYSYN Ventures Weekly Insights #78 - Investors are optimistic about the cryptocurrency’s future
After several attempts, the $50,000 level has proved to be strong resistance for Bitcoin to break above. Since pulling back from the current all-time high (ATH) of $69,000, the world’s largest cryptocurrency has left users guessing what its next move will be. With adoption and other indices showing positive results, the current price action appears to be contrary to market expectations.
In the latest VYSYN Release, we analyze the recent Bitcoin price behavior, identifying some of the external factors affecting it at the moment. We also consider the impact of this market behavior on user expectations and the fundamental factors that could determine the long-term path of Bitcoin’s price.
Bitcoin struggles to climb above $50,000
After reaching an ATH of $69,000, Bitcoin embarked on a pullback that was originally expected to be minor and short-lived. After several weeks, the pullback has sustained itself with price action showing that the bulls and the bears are in a struggle to move price in either direction.
The sustained pullback means that Bitcoin prices dropped below the $50,000 support level for the first time in about six weeks. Since the downward spike that saw Bitcoin drop just below $42,000 on Saturday, December 4th, 2021, the cryptocurrency has repeatedly attempted to break above $50,000. So far, the bulls have not succeeded in this process.
The pullback below $42,000 has been significant to current volatility, with initial response taking the form of a quick rebound which saw Bitcoin move quickly towards the $50,000 level. Ever since, the price keeps hovering around this level, leading to the assumption that most bulls are paying close attention to the market, expecting a convincing breakout to the upside. Should this happen, it could initiate another significant bull run for Bitcoin.
Economic data and events hurt Bitcoin prices
Economic reports and releases have also played a role in Bitcoin’s current price fluctuations. Reports from the United States revealed inflation at a whopping 6.8% in November 2021, the highest that the U.S. has recorded in the past 40 years. Outside the U.S., the potential debt default by Chinese real estate giant Evergrande has also sent investors into panic mode.
These two major events, among others, have the potential to create a domino effect across the global markets. If this happens, stocks and risky assets like Bitcoin become affected, as investors tend to become risk-averse under such circumstances. As a result, Bitcoin investor sentiment veered towards extreme fear. For the first time since July 2021, the Bitcoin “Fear and Greed” index dropped to 16/100. The drop in July coincided with the dramatic pullback that Bitcoin encountered in Q2, 2021, after a significant rally earlier in the year.
Bullish traders and investors see this as an opportunity to set up their portfolios for potential gains in the future, since prices seem unjustifiably depressed at the moment. This is especially the case since other fundamental factors reflect positively on Bitcoin growth.
Fundamental factors look good for Bitcoin
One of the factors that measures the growth and stability of Bitcoin is the Bitcoin hash rate. This is the sum of the computational power that is generated by miners across the Bitcoin network. In the aftermath of China’s ban on Bitcoin and cryptocurrencies earlier in the year, many mining rigs were shut down.
As a result, the global Bitcoin hashrate dropped dramatically. Recent events have shown that most of the mining rigs that shut down relocated to more friendly regions. The situation also created an opportunity for new miners to make their way into the industry. As of December 10th, 2021, the Bitcoin hashrate reached an ATH of 181.77 TH/s, surpassing the previous ATH of 180.67 TH/s which was achieved on May 14th, 2021.
The growing hashrate is a key fundamental development, and perhaps one of the reasons why Bitcoin advocates remain optimistic. On December 13th, 2021, Purpose Bitcoin ETF, the world’s first Bitcoin ETF in Canada increased its holdings by acquiring 4,342 Bitcoins, bringing its total holdings to almost 29,000 coins.
Other reasons why users remain optimistic about the growth of Bitcoin revolve around its fundamental use cases that are based on the original design of the cryptocurrency. Such use cases include financial inclusion, serving as an alternative currency for people in nations that are plagued with inflation, cheap remittance, and other microeconomic solutions.
For these reasons, many Bitcoin users believe that the current struggle will fizzle out within a short period. More adoption is anticipated, which will consequently reflect in the price of the pioneer cryptocurrency. According to the Bloomberg Intelligence senior commodity strategist Mike McGlone, the United States will likely embrace Bitcoin in 2022, with proper regulations. He noted that this scenario will have some bullish implications for Bitcoin.
McGlone said that a primary force to reverse expectations for Federal Reserve tightening in 2022 is a drop in the stock market, which may be a bit of a win-win for Bitcoin. According to him, Bitcoin appears to be on a trajectory for $100,000 and is well on its way to becoming a digital store-of-value, similar to gold.
Jurrien Timmer, director of global macro at Fidelity Investments also predicts a $100,000 target for Bitcoin. Timmer’s prediction is based on organic market movement driven by the influx of investors into the Bitcoin market. He has asked investors to expect a “pretty sustainable” rise in Bitcoin’s long-term value.
Bitcoin’s current situation is not new among cryptocurrency users. Stalling around major support and resistance is an occurrence that crypto industry players are familiar with. During such situations, experienced traders and investors focus on the bigger picture, focusing on fundamental indicators. Considering those, one would easily agree with the prediction of the experts above, expecting Bitcoin to surpass the $50,000 psychological level and aim for higher prices.
About VYSYN Ventures
VYSYN Ventures is a longstanding venture capital company that specializes in funding and supporting disruptive startups in the blockchain and cryptocurrency industry. We have provided early-stage support to several projects that have grown to USD market capitalizations of hundreds of millions and even billions. Our incubation program focuses on providing capital allocations, versatile marketing support, and tech assistance.