Bitcoin short term pullback, long term slingshot
When discussing Bitcoin or the cryptocurrency market as a whole, we’re often met with repeating sentiments such as digital assets are too volatile, I’ve already lost money in this market, and my personal favourite, it’s too late cryptocurrency was a bubble.
Although all valid concerns, as a way to combat the idea that it’s too late or that cryptocurrency was a bubble, I often ask new and existing crypto investors to do the following, take a step back, zoom out on current price action and critically evaluate where this market has come from and where it has the potential to go in the future.
Consider the following example when evaluating the size, value and operational duration of the cryptocurrency market. Beloved tech giant Apple, was established in 1971 has been in business for 43 years and is worth $998 billion. Whereas, bitcoin has only been around for +-7 years and has a total market cap of $152 billion, which is roughly ⅛ th the total value of Apple in only a ⅙ th of the operational time.
Further to this, when considering supply and demand, bitcoin is actually a finite resource much like Gold, fossil fuels, crude oil etc. Bitcoin has a limited mineable supply of 21 million coins. To date, +-17 million bitcoins have already been mined, which accounts for roughly 85% of the total bitcoin supply.
Interestingly, If we take the current global population figures into account and the remaining 3 million bitcoins left to mine, there is only +- 0.00042 bitcoin left per person on the planet. This presents both retail and institutional investors with a unique albeit limited time frame to accumulate a finite number of bitcoin at current prices.
Taking the above example into account and upon zooming out further, most if not all investors, immediately realise Five key points:
1.) Markets are cyclical and often repeat historic patterns, prices and trajectory
2.) Short term price fluctuations and corrective pullbacks present investors with the unique opportunity to average in and accumulate more bitcoin
3.) Digital asset investment should be viewed as a long term financial strategy, to maximise potential returns
4.) Today’s digital asset investors should consider ourselves as early adopters, given the fact that the cryptocurrency market is still in its infancy, compared to the size and value of traditional financial markets
Bitcoin Long Term View:
If we take the historical graph below as a steer, we can see since bitcoin’s inception, there has been multiple bull and bear market cycles since 2011, with each cycle reaching a peak price, followed by a significant pullback. It’s important to note that these cycles continue to repeat themselves in a somewhat predictable all be it an extended timeline. If we look at the current date 2019, we clearly see that we’ve successfully completed a bear market cycle, much like the previous years and could potentially be starting a new 3-year bull market cycle peaking in 2023. Further emphasising the need to view cryptocurrency investment as a long term strategy, maximizing the time value of an investment.
Source @davthewave
Bitcoin Short Term View:
Given the 230% increase in the price of Bitcoin from April’19 to June’19 from it’s yearly low of $3200, it comes with no surprise that we see a 75% pullback in bitcoin price from July’19 to October’19. Given how sharp the price has increased this year, a pullback of this nature could be considered as healthy and a way for the market to reset itself before starting it’s moving up toward this new all-time high. This further illustrates the limited time to accumulate at current prices.
Source @davthewave
In conclusion, in the short term, bitcoin could potentially see further consolidation, before reversing and slowly making its way back up.
However, if we look at the long term bitcoin view, we can clearly see that we are at the beginning stages of a new market cycle. Irrespective of your investment strategy and the current bitcoin price, it’s clear that there is both limited time and available bitcoin to be collected at current or lower prices before the start of a new cycle.
Each bitcoin dip or price decrease could be viewed as an opportunity to average in and buy even cheaper bitcoin, with the overarching strategy to collect as much bitcoin as possible in a limited time frame.
Given bitcoins limited supply, while also factoring in events such as the bitcoin block reward halving, and with a long term view on investment. It's fair to assume there is room for exponential growth across the entire cryptocurrency market.
References:
https://www.investopedia.com/tech/what-happens-bitcoin-after-21-million-mined/
N.B — This is NOT to be taken as financial advice, but merely for research and speculation purposes.
