Bitcoin has had several episodes of corrections in its past, even more serious than the one now. Namely:
These corrections that are evident in the graph average 80%, so it could be expected that bitcoin can continue to fall to the order of the $15,000. Another way to see the evolution of the bitcoin price is this:
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Although it is not updated to May 2022, it can also be inferred that the bitcoin price floors are higher and higher before each setback and can also be deduced from the fear & greed index. East Fear and Greed Crypto Index offers a score from 0 to 100 on the market sentiment of cryptocurrencies. It is based on the CNNMoney Fear and Greed Index for stock market analysis.
Fear (a score from 0 to 49) indicates undervaluation and oversupply in the market. Greed (a score of 50 to 100) suggests cryptocurrencies are overvalued and have excess demand. Let’s compare this moment with the same price level of 2020.
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At the same price level, close to US$30,000, during 2020 the index was above 70% and now it is 10%, which indicates that a trading floor that at other times was higher is considered an extreme level of fear. close to an ATH. This implies that we are at a time where weak hands sell and big buyers take advantage, which added to the scarcity, speed of issuance, decentralization of the bitcoin network, makes its price rise over time and position it as a currency. that complies with the quality of reserve of value, among other advantages such as portability, non-confiscation, privacy, etc. In an average of 3 years, no one who has invested in bitcoin has lost.
But the volatility is not exclusive to cryptocurrencies, the US dollar has lost almost 100% of its value in the last century, oil has reached negative values and gold (historical reserve par excellence) has also had its ups and downs.
It is no coincidence that bitcoin emerged after the 2008 crisis, where the current monetary system was questioned and its relevance was reinforced in different economic cycles around the world.
Currently, with a pandemic in between and a possible world war on the doorstep, from the technological point of view, it meets the perfect conditions to be able to facilitate the exchange and transport of value between people on the Internet without requiring any intermediary of a government or company nature, being a network that is increasingly robust and safe; It is worth noting that a few days ago and in the midst of the turbulence in the crypto world due to the setback and fall of the Terra ecosystem (LUNA/UST), bitcoin achieved its ATH in hash rate (computing capacity of the network). If we look at it from the performance of the market, there is a correlation with the behavior of others like the S&P 500 and the Nasdaq 100.
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This correlation calls into question whether bitcoin is a hedge asset or not. We would basically be comparing a very young and unregulated market with other regulated markets with more experience.
A new monetary system based on bitcoin and cryptocurrencies sounds promising, in my opinion as an alternative that will mature as a technology and that will coexist with the current ones or the new ones that arise hand in hand with states and corporations, but the more it is adopted, It will have a greater impact on people’s lives. Time will tell what role it will play in the future.
Crypto teacher and communicator.
Source: Ambito
