Crypto prices are dropping, but BTC is the most solid of them all. The community also fully supports it, let’s find out why!
Bitcoin’s price trend, historical data in hand, follows a 4-year cycle. The trend is marked by the halving event, which occurs precisely every 4 years. The Halving refers to the gradual halving of the BTC rewards that miners receive for their work. The event seems to coincide with the end of one of Bitcoin’s price cycles and the beginning of the next. In fact, since the creation of BTC, its price has followed a pattern where the halving is followed by 18-24 months of a bull market, which is subsequently followed by two years of bear market. Taking into consideration the timing of this theory, we are in the middle of a bear market. The next halving is expected to happen in 2024, when the supply of BTC will then change and consequently so will market behaviour. A bear market can be broken down into several phases, and understanding them can help us look in perspective at Bitcoin’s current market momentum. Discover Bitcoin’s 7 strengths in the face of dealing with a bear market!
Phases of a bear market
If we consider the previous bear market we went through, we can distinguish 7 phases:
- The collapse: when the market collapses very quickly, for both Bitcoin and altcoins;
- Rejection/denial: when there is a tendency to think that prices are only subject to one of the many usual declines;
- Realisation: when you realise that you’re not faced with just a temporary market downturn. Often this realisation also comes from a broader observation of the macroeconomic context;
- Panic: after a general realisation of what is happening, people panic and this perspective changes the market mentality. Any attempt at a rebound is eliminated by those who try to limit their losses by selling. At this stage, the rebounds are pushed by bitcoiners attracted to buying BTC at reduced prices;
- Accumulation/stabilisation: although the majority of users panic, those who take a long-term view accumulate mainly ‘solid’ coins such as BTC rather than altcoins;
- Anticipation: at this stage funds begin to return, Bitcoin is on the rise again. People are also start to buy medium market cap altcoins again;
- Steady growth: the market is growing steadily again. There is a shift from extreme fear to neutral sentiment.
We are currently in the panic phase, number 4, where the Fear and Greed Index has the lowest values (extreme fear). The market is slowly trying to move into number 5, or stabilisation. Those who are fully immersed in panic mode find it difficult to perceive the build-up. It is not possible to precisely predict when the bear market will evolve into the next phase. However, if we compare BTC to other cryptos, we can see that although they are all falling, Bitcoin is the one that is dropping the least. While most altcoins are falling more than 90% from their ATH, Bitcoin’s decline is just under 70% from its ATH of $69,045.
The only certainty is that the next halving will be in early 2024 (this is determined by the algorithm), and the market equilibrium will then be upset again. Those who take a long-term view and are convinced of Bitcoin’s value beyond its mere price will continue to buy and hold. The foresight of bitcoiners begs the question: why does Bitcoin continue to be supported? Here are Bitcoin’s 7 strengths to face the bear market!
Bitcoin’s strengths: why bitcoiners don’t give up
Bitcoiners don’t panic. The bear market can sow all the panic it wants, but there are those who just won’t abandon Bitcoin. This is because the strengths and potential of Bitcoin go beyond its price. Bitcoin is in fact:
- Open source: everyone can have access to and verify information processed by the blockchain, but above all, everyone can contribute to the development and improvement of the whole network;
- Transparent: you don’t need to have blind trust in how it works. One of the slogans the BTC community is fond of is ‘don’t trust, verify’, precisely because everything is in front of your eyes, available and verifiable;
- Neutral: it knows no politics and does not depend on any national or international legislation (at least as far as the functioning of its blockchain is concerned, mining for instance may be restricted);
- Decentralised: the BTC network is composed of nodes scattered all over the world and no single company or person holds all the decision-making power;
- Resistant to censorship: the only way to block Bitcoin is to block the internet (and we can only imagine what the consequences of disconnecting the whole world would be);
- Secure: Bitcoin’s security is guaranteed by its Proof-of-Work consensus mechanism. The work of miners makes transactions secure and the decentralisation of nodes means that there is no interference;
- Characterised by a winning monetary policy. Its scarcity and digital nature make Bitcoin an alternative to economic systems as we know them.
Will the next halving save us?
As always, the market mirrors many factors, most of which are unpredictable. The halving gives us hope for an improvement in Bitcoin’s performance because it has always had a positive impact in the past. However, the consequences of the last halving in May 2020 were also influenced by external elements such as the FED’s restrictive policy. In all this the stock-to-flow can be useful as a trend indicator but the future of BTC is all to be written!