The Bitcoin price has hit a new all-time high, crossing the $70,000 mark more than 2 years after it was expected to do so. This impressive run has brought about more euphoria. It has also brought increased speculation as to whether this is the right time to buy more of the digital asset with the belief that its price would continue its upward trajectory, or whether to sell because a rise like this almost always goes before a fall.
Whatever one decides to do depends on the speculators and experts they trust and the quality of information they offer. Indeed, many enthusiasts think that the flagship coin hasn’t completed its bullish run. Aside from the Exchange Traded Funds (ETF) whose emergence is a major factor fueling the increasing price, enthusiasts expect that the forthcoming Bitcoin halving would lead Bitcoin price to its ultimate climax.
While there is a lot of sense in that, financial experts are however of the opinion that this run wouldn’t be any different from the run of 2021 which saw the price of the digital currency when it hit an all-time high of $69,000 before crashing to a humiliating low of $15,800 the very next year.
This represented an outstanding loss of 77.1 per cent of its value even as the entire crypto market lost more than $2 trillion.
The reasons for the Bitcoin price crash of 2022 are obvious. In December 2021, one of the largest publicly traded crypto mining companies in the U.S., Core Scientific, filed for bankruptcy. Core Scientific is a company which primarily mints Bitcoin. The company blamed falling crypto prices and rising energy costs as the reasons for its collapse. This raised several eyebrows about the sustainability of the Bitcoin project.
But the most important factor which sent Bitcoin price crashing was the collapse of the crypto trading company, FTX, which was then the largest crypto trading platform in the world. At the peak of its powers, FTX was valued at $32 billion and raised $1.9 billion from 80 investors in two years.
The ripple effect of the collapse of Sam Bankman-Fried’s FTX led to crashing prices, tarnished the reputation of the entire crypto industry and prompted a regulatory crackdown. The effects of the regulatory crackdown are still been felt around the industry.
But cryptocurrencies experienced a period of slow, painful albeit consistent growth in 2023 and by February 2024, spurred by the ETFs, the price of Bitcoin had risen above $40,000. This ushered in the period of massive hike in which we currently find ourselves.
Enthusiasts and optimists have even declared that this was essentially the famed march to $100,000 price cap which had once been touted back in 2021.
But is this the case?
Why experts believe Bitcoin price would crash
As Bitcoin continues on its bullish path to the excitement of investors, sceptics are still very cautious about it. There are still concerns about not just Bitcoin, but cryptocurrencies in general.
The first is that cryptocurrency exchanges and crypto-focused companies are filing for bankruptcy and folding up. The list is exhaustive, starting with FTX to Genesis Global. Then there was Gemini Trust, Block Fi and Celsius Network.
The case wasn’t very different in Nigeria with the closure of Bundle, Lazerpay, Nestcoin and others.
In the words of Ken Sweet of the Associated Press, “Crypto firms acted like banks then collapsed like dominos. This is hardly a good sign for the sector.
Another concern is that countries are beginning to crack down on crypto companies. A crypto exchange like Binance couldn’t even catch a break from regulators globally, from the US to the UK and even in Nigeria where 2 of its executives were detained by the Nigerian authorities over allegations of FX manipulation.
Then there is the global call for regulation with governments heeding those calls and imposing strict regulations over the space. This, they believe will threaten the decentralized nature of cryptos, the unique quality upon which their very existences hinge.
Other factors are security risks and hacks which are now a daily occurrence. And, of course, the age-long argument that the prices of cryptocurrencies are based on nothing but speculation. So why do sceptics believe this would lead to a price crash?
First, the recent price bump is directly attributable to the activities of the ETF; a group of nine companies or Trusts, whose aim is to it easier to invest in Bitcoin. Formed in January, by February the Trusts have started attracting new money into the crypto space.
The ETFs pulled in more than $52 billion in new money in about two months. This was faster than the 6 months analysts expected them to take. While this is impressive as it is driving the current run.
The ultimate question remains, what happens afterwards?
Speculations do not make investments and with nothing propping it up, a decline can be expected to set in.
Moreover, with the Bitcoin rush currently being experienced, many traditional momentum measures are indicating that at current levels, Bitcoin appears to be overbought. According to an analysis report, its relative strength index has been largely above 75 since early February, a key measure of whether an investment is overbought.
Therefore, the digital asset is increasingly vulnerable to an abrupt selloff. This would become increasingly likely after the Bitcoin halving which is expected to conclude the current bull run. Bitcoin price is predicted to hit $80,000.
Despite these, there are still beliefs that Bitcoin would go on to do great wonders. CEO of ARK Investment Management, Cathie Wood, predicted that Bitcoin price would hit $1.5 million by 2030. Looking farther into the future, she believes one bitcoin would eventually be worth up to $2.3 million.
She also said Bitcoin will become so valuable that it will represent something on the order of 19% of global investable assets.
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