Bitcoin, You OK, Buddy?

Checking in with investors and analysts on the world’s most prominent cryptocurrency. 

Perhaps Bitcoin has had worse weeks than this, but not in 2021. It’s painful like watching a long-distance runner stumble to see the price dip briefly to a 5-month low under $30,000.

Like any online community, Bitcoin supporters have been understandably emotional and full of correlations between the price drop and external factors -- specifically regulatory concerns in China, the actions of institutional and panicking retail investors, concerns over the environmental impact, and some select, conflicting tweets by Elon Musk. 

As crypto loses nearly $1 trillion in market cap, there has been no shortage of rancor devoted to Musk in the cryptosphere, but with so many possible contributing factors, what is the real cause… and where is Bitcoin likely to go from here?

We spoke with some of the leading investing minds in crypto to get some perspective on these latest price movements.

Sanity Check with Crypto Market Experts

Brock Pierce is one of the leading investors and promoters in the cryptoworld. He is Chairman of the Bitcoin Foundation and co-founder of EOS Alliance, Block.one, Blockchain Capital, Tether, and Mastercoin. In an exclusive interview, Brock explained he thinks that the panic over the recent price drops shows people are focusing on short-term views. 

“The movements in XRP and DOGE have been signaling in the crypto market a lot of public speculation, focusing on the wrong things.  That is how it causes leverage and unwinds in the market.  While it’s difficult and makes the market more fragile in the medium and the longer term, it de-leverages the system and creates a much more stable base for crypto and asset prices to rise from here,” Pierce said. 

Pierce has raised more money in blockchain projects and cryptocurrency than virtually anyone else and seems to take a long view of the price adjustments in crypto.

“I think we have a high amount of new investors in the crypto space, who are inexperienced and trading completely speculative tokens, that are completely overvalued.  When you have tokens such as DOGE and XRP, DOGE, in particular, having a higher market cap than Apple, obviously some of these things are overvalued and destined to crash,” Pierce said. 

Pierce made the point that, although Musk’s tweets may have influenced the fortunes of BTC, no one person is the defining factor in any price movement.

“The market has been very focused on the tweets that Elon Musk has been making but no one person or celebrity or investor is what ultimately is going to be defining crypto prices long-term -- whether they are a supporter or a detractor. Even with his latest tweet with diamond hands, he has shown to be very temperamental with his tweeting,” Pierce said.

As for Musk’s specific influence on the market, Pierce sees his impact as another evolving situation. 

“The more-and-more (Musk) talks, the less credibility he gets. You saw that with his appearance on Saturday Night Live -- when he mentioned DOGE it had an inverse effect on the price.  People seem to be frustrated with him and it’s possible some of that may be warranted,” Pierce said. 

Pierce sees a positive future for Bitcoin -- but that doesn’t eliminate the element of uncertainty. 

“.. I think we’re likely to see the price hit $100k before the end of the year -- that being said, anything could happen,” Piece said. 

Laurent Lamothe is a global thought leader, technology entrepreneur, and former Prime Minister of Haiti. In an interview with Benzinga, Lamonthe suggested this dip isn’t the end to Bitcoin’s historic bull run which began in 2020. 

“I think the Bitcoin bull run is far from over and actually (I’m) very upbeat for the future. There is wider adoption and acceptance and today’s climate is conducive for digital currencies. Massive investments are underway,” Lamonthe said. 

Lamonthe believes that some of Musk’s criticisms concerning the environment may be misdirected. 

“Well, Elon is the biggest influencer in the crypto world today, it is evident how his tweets or his Saturday Night Live appearance are impactful on the crypto trend (positive or negative). However, after saying that Tesla supports Bitcoin they then came out criticizing Bitcoin for energy consumption as a bit of surprise since a lot of the mining is done via renewable energy sources and is driving massive investment into renewables. So he will figure it out as he is one of the brightest minds on earth,” Lamonthe said. 

However, Lamonthe doesn’t think the impact of influencers in the crypto space is a net negative for the blockchain industry. 

“Look at all the celebs that are in the space right now: Snoop, Marc Cuban, Elon, and Brock Pierce. They are making waves and mostly positive ones. I do think it will contribute to greater adoption. Their engagement promotes trust and visibility for Digital Currencies,” Lamonthe said. “...the only drawback is when celebs speak, their followers follow: sometimes blindly! Ultimately it is the investor's responsibility to invest or not. Do the research and use the celebrities' opinions simply as a reference point.”

Viktor Prokopenya is a tech leader and one of the most entrepreneurs of his native country of Belarus and is now a London-based fintech investor. Prokopenya suggested in an interview with Benzinga that investors tend to their crypto portfolio with environmentally-conscious choices. 

See also: Is Bitcoin a Good Investment?

"My advice to those who want to make more environmentally friendly investment decisions would first of all be to ‘green up’ your portfolio. Remove any stocks that are polluting the environment and have serious effects on the environment; almost every company discloses its environmental impact in their reports. Focus on opportunities in the areas that make our world a better place to be.,” Prokopenya said. “Today, everybody can impact the world not only by doing what is best for the environment by their actions but also by making wise investment decisions. This is financial democracy in action."

In terms of predicting Bitcoin’s future performance, Prokopenya believes we have only the coin’s past behavior to look to for guidance, challenging the whole idea of a “market correction” with an unprecedented asset like Bitcoin. 

“The term market correction implies an intrinsic value that is agreed upon by most market participants -- this is lacking, therefore the notion of correction is irrelevant. Instead, it would be more prudent to analyze BTC’s price movement in cycles that are often separated by significant downward pressures: a 70% drop between December 2017 & February 2018, a 50% drop in November 2018, and a 58% drop in March 2020. The 52% drop the markets have experienced in the past month certainly will not be the last drop,” Prokopenya said. “What follows such moments of extreme volatility is statistically difficult to predict... More thought should be given to the fact that the most important correction during the coming weeks will not necessarily be on charts but will pertain to the mentality of traders and investors ... hubris of influential figures is likely to be taken with more than a pinch of salt accompanied by a return to shrewd risk management.”

Other respondents, including George Chrysochou GMO & Crypto Trader of Financer.com, believe that we need to look beyond individual news events to see the pattern of Bitcoin’s price movements.

“When it comes to bearish news, the most major events were China expanding their Bitcoin ban and no longer accepting Bitcoin due to environmental concerns. However, neither of these news items should be enough as catalysts to trigger a complete marker reversal,” George Chrysochou GMO & Crypto Trader of Financer.com said.“The drop likely happened as a result of negative technical indicators and bearish news. More specifically, we have been overextended from the 21 week EMA, 100 day MA, and weekly RSI, among other indicators, since October 2020. During the previous 2016-17 bull run, we had six 30%+ drops without breaking the cycle,” Chrysochou said. 

However, Chrysochou doesn’t see this as a long-term change in direction for Bitcoin. 

“There is little chance for this market to be so prematurely over as this will be in contrast with most price-prediction models. The 64k top was most likely a short-term top, and if the past cycles are of any indication, we should expect a new 100k+ top within the next 4 -12 months. The current price phase resembles the 2013-2014 cycle where we had two tops and a steep consolidation phase between them,” Chrysochou said. “I believe the current bearish sentiment may last for a few weeks/months before we gain enough confidence and momentum to break the previous all-time high and decisively move into the final bull cycle parabolic run.’

Prabaldeep Paul, Director, Corporate and Consulting at Acuity Knowledge Partners, reminded us that crypto markets are highly volatile and this recent drop is not off-pattern from what we have seen in Bitcoin before.

"The key triggers of the crypto market’s sharp correction are the recent warnings from Chinese regulators, the caution and increased scrutiny signaled in the SEC’s recent announcement on Bitcoin futures, and Elon Musk’s U-turn on Bitcoin acceptance. While these are the triggers, crypto markets are highly volatile: sharp corrections, sometimes by about 80%, have followed all bull runs, as we saw in 2013 and 2017,” Paul said. "However, the silver lining for Bitcoin and Ethereum is that they have rebounded much stronger after every fall, as markets have shifted from highly speculative, non-functioning tokens to the proven, functioning chains of the two cryptocurrencies.”

Nate Cox, chief investment officer of Two Prime, a digital investment firm specializing in Bitcoin and Ethereum explained that this setback does not change the central value proposition of Bitcoin. 

“Today's pullback is not indicative of the end of the bull run. However, it is understandable that we might see continued volatility and range-bound trading. The underlying value proposition for Bitcoin has not changed. It still remains a compelling store of value asset that provides protection against inflation, with asymmetric upside return potential. Despite the large dip, BTC is still up ~32% YTD and up 273% over the last 12 months,” Cox said. “Personally, I still expect to see Bitcoin in the $80k - $100k range by the end of 2021, with the potential to go much higher.”

Pierre Bourque, CEO of Blockchain Radio and influencer said the recent Bitcoin drop may be unduly influenced by the opinions of very few, but it doesn’t stop Bitcoin’s bull run momentum.

“The herd moves on the comments of the chosen few, the ones listened to rightly or wrongly.... I’ve heard many OGs in the crypto space anticipate the magic $100K threshold. Six months ago, it was hard to imagine. But when Bitcoin went over $60K recently, I decided anything possible,” Bourque said. 

Alyse Killeen, Founder & Managing Partner of StillMark, a Bitcoin VC Firm, told Benzinga that Bitcoin may be experiencing some growing pains -- uncomfortable for everyone, perhaps, but not fatal.  

“Bitcoin is almost 13 years old, and like all 13-year-olds, it’s entered a period of transition. Bitcoin is no longer ‘new’ and there are now plenty of competing altcoins on the scene. But in the long term, Bitcoin and the blockchain will be judged on their utility... When people start interacting with the blockchain and the services built on top of it, that’s when we will see a significant and sustained increase in Bitcoin’s price.” 

Killeen believes that for investors this phase of Bitcoin’s maturation may represent an opportunity for savvy investors. 

“Volatility of exchange rate is a part of the bitcoin market’s maturation and an opportunity for traders and speculators... It's likely we’re in a capitulation phase, which is generally a good time to buy assets. However, timing the market is a risky endeavor, especially with a short-term perspective,” Killeen said. 

Conclusion

Bitcoin has suffered through a conflagration of some prominent bad sentiment, negative responses from jumpy investors who have been used to the sunny skies of a sustained bull run, and regulatory threats in China and the U.S.

However, we are still living in a world with a demand for a decentralized digital currency. The value of Bitcoin will continue to rise with the demand for that use case, to reduce fees and intermediaries in the transfer of value. That said -- investors may still be in for a bumpy ride with pronounced highs and lows in the months to come. 

 

Cover image modified from image by Comfreak from Pixabay