Any Thoughts on Where Bitcoin Value is Headed?
Bitcoin value and the price of Bitcoin have seen renewed interest following the collapse of SVB. In this piece, we highlight three key aspects of the top cryptocurrency that need focus going forward
What: The Silicon Valley Bank (SVB) collapsed. While it comes as fresh CPI data was released in the US, the failure of SVB follows that of the cryptocurrency-focused lender, Silvergate — which some say should have happened earlier — , and then Signature Bank.
Why it matters: They are all related to the crypto sector in a way. SVB has deposits for USDC reserve held in cash which saw the value of its dollar-pegged stablecoin dropped at some point before it later regained parity; while Silvergate and Signature Bank’s Signet offered real-time payment platforms for moving large amounts in fiat settlement for crypto to enhance liquidity.
Related implication(s): These failures are all supposed to be negatives for the crypto sector. Rather, the opposite seems to be the case. A rise in search trends for ‘what is Bitcoin’ over the past week; and a mild surge in the price of Bitcoin is what we get at a time when the crypto industry is losing some important players. It seemingly started like the fall of SVB signaled a bull case for the price of Bitcoin as the top cryptocurrency increased roughly 10% almost immediately. Now, we are at more than a 9-month high; the price of Bitcoin crossed the $28,000 range as of this writing (or a 28% rise in seven days) according to data from a crypto aggregator, CoinGecko.
Let’s discuss: SVB’s collapse comes with a reminder that somewhat triggers what many once thought is a major reason why we need Bitcoin: to hedge against inflation and other finance-related uncertainties. Yes, Bitcoin came in the wake of the 2008 financial crisis when traditional finance had some issues related to what we are seeing now: its centralized nature and the lack of trust that permeated its operational banking model. But, despite the strong market demand in the wake of a failed bank’s model last week, is it safe or too early to say that we are back on that trail of what brought Bitcoin to life?
Forward-looking: There is bound to be an increased demand for Bitcoin— and invariably the price of Bitcoin—once more investors recognize it for its use case(s) including its store of value attribute, as well as for holding and moving money securely. And, before now, there have been calls to brace up for what is to come like Ark Invest’s projection that the price of Bitcoin could still be above $1 million over the next decade (we reported about it here). That’s at a whopping crypto market value of about $20 trillion in 10 years (or about 17x of the current total crypto market cap). It’s not clear what stage we are at this moment. What is obvious is that the issues with Silvergate, SVB, and Signature will pass, and others will take their place. We’ve seen it before. Bitcoin’s value — particularly its transparency and security–will remain, without the need for trust in a central authority, as a decentralized network for moving and storing money across the globe without any intermediary. There will be more questions related to ‘what is Bitcoin’.
What to keep in mind: The need to focus on: 1) Bitcoin value; 2) Bitcoin use cases’ propensity to gain more traction; and 3) the Bitcoin market’s 10-year outlook. Keep doing your own research. We’ll see how it pans out.
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