After weeks upon weeks of new all-time highs, it seems the Bitcoin rally may have finally come to an end, at least, for now.
Indeed, at press time, the price of Bitcoin was down roughly 20 percent, sitting around $33,800 and poised for further drops. The drop follows a peak of roughly $41,670 on Friday.
The #Bitcoin price during this dip is higher than the Bitcoin price throughout all of 2020.
— Lina Seiche (@LinaSeiche) January 4, 2021
(Although, if Bitcoin was over $41,000 yesterday and $34,000 today, you may have been better served to wait just one more day.)
Joaquim Matinero Tor previously told Finance Magnates that he believes Bitcoin could fall as low as $18,000 before making significant movement upward.
“I think the price of Bitcoin will fall under 18,000 dollars and then rise back,” he said. “Whale investors will sell once the financial year is over. So, January may be a rollercoaster ride for the cryptocurrency market.”
At the same time, though, it might be wise not to wait too long, Ramp Capital pointed out on Twitter last week that that “Bitcoin would have to drop 50% from here just to get back $16,500 — the level hit on Thanksgiving 2020.” Now, since Bitcoin has risen even further, the drop would have to be worth more than 50%.
2017 All over Again?
However, this is not entirely impossible, or even unlikely as Bitcoin has previously lost more than half of its value on multiple occasions.
The instance that is perhaps most comparable to this current moment is the rally that took Bitcoin over $20,000 in late 2017 and into early 2018. BTC reached a peak of nearly $20,000 in mid-December but dropped below $7,000 by the first week of February 2018. It would be three years before Bitcoin would come close to $20,000 again.
Could something similar happen this time? Could BTC lose nearly 70 percent of its value before embarking on another 3-year journey to recovery? It is certainly possible, but some analysts seem to think that this time might be different.
Last week, Brandon Mintz, Chief Executive of Bitcoin ATM network, Bitcoin Depot, told Finance Magnates that unlike 2017, the recent run to $41,000 is driven in large part by institutional investment in Bitcoin.
“We’re seeing fresh stories about institutional crypto adoption on almost a daily basis at this point,” he said.“[…] Sustained growth is likely from here, at least for the time being. We are being driven by corporations and billionaires now, not just retail investors.”
Moreover, Mintz pointed to the fact that market conditions outside of Bitcoin are very different than they were in late 2017. Throughout 2020, the COVID-19 pandemic caused the United States government to print trillions of dollars. Many believe that this continuous printing will lead to inflation over the long-term. In the worst-case scenario, some believe that this could lead to a financial crisis.
Therefore, the anti-inflationary mechanisms that Bitcoin has in place may make it far more attractive than it was in 2017. “The scarcity of BTC compared to the printability of dollars is likely to attract savvy individuals looking to diversify their assets in the event of a lapse in the traditional financial system,” Mintz explained.
“As the adoption rate of BTC increases and the supply remains constant, the value of BTC will only continue to rise.”