The dream of easy money on the crypto hype train may be the most intoxicating siren song that few are able to resist. Recently, I have noticed many analysts predicting that Bitcoin will reach $130,000 within the next 90 days, a projection that, while enticing, clashes sharply with the realities of market dynamics and historical trends. The tech landscape in this nascent crypto space is thriving and absolutely incredible. It’s dangerous to take large, audacious claims at face value. In short, I think a perfect storm of factors suggests a more sober Bitcoin near-term outlook.
We’re committed to delivering smart, inarguable, full-spectrum analysis to our readers. So in that spirit, it’s my obligation to provide the counterpoint even when it runs against the bullish tide of opinion. On the affirmative side, there are encouraging larger market indicators. They fail to pass the smell test for a planned meteoric rise to $130,000 pay in a very short compressed time frame.
One of the main reasons for my concern is the historical record of unsustainable, lightning-fast price appreciation. Indeed, due to the non-inflationary nature of Bitcoin itself, Bitcoin is already subject to tremendous volatility. Of course, past performance is no guarantee of future results, but it offers useful perspective to be sure. I recall the thrill of late 2017, when Bitcoin suddenly surged to almost $20,000. That excitement was soon transformed into dismay as it plummeted spectacularly in the following months. Boom-and-bust cycles are expected occurrences in the cryptocurrency market. It’s dangerous to bet against this historical pattern and assume that the present bull market will somehow be the exception.
Additionally, Bitcoin’s volatility makes it extremely challenging to reach the intended price target. The history of the cryptocurrency’s price is a tale of peaks and valleys, breathtaking highs that turned into devastating lows almost as quickly. For instance, Bitcoin peaked at $64,258.89 on February 22, 2021 and subsequently crashed to $3,414.68 on March 19, 2021. Several macroeconomic factors have impacted the price of Bitcoin. These factors consist of interest rate changes, inflation, global economic conditions, investor sentiment and market trends, regulatory changes, and government policy. Given this built-in volatility, predicting a near-term increase to $130,000 is pretty wishful thinking.
Two counter-cyclical bullish indicators recently caught my eye. The Hash Ribbons are currently printing a buy signal along with the 30-day SMA crossing above the 60-day SMA. I am still far from convinced. Though all these signals indicate we may be recovering from miner capitulation, they do not ensure a parabolic price boom. In the same way, we find the upward-sloping moving average lines of the Pi Cycle Top Indicator as promising yet cautionary bullish signs. These indicators are surprisingly powerful tools for understanding disruptive market trends. Do not use them in isolation to forecast future directional price movement.
S2F ratio is currently about 57.712. This means it would take roughly 57 years to mine the entire Bitcoin supply, causing many to view it as a price appreciation catalyst. This metric by itself hardly warrants the expectation of a short-term moonshot to $130k. Market sentiment, regulatory developments, and macroeconomic conditions are going to heavily impact Bitcoin’s short-term price direction. Of all these elements, I think these three will be the most important.
Speaking of market capitalization, I want to address that too. Bitcoin’s market presence has been volatile and erratic throughout the years. It has not shown a recent, repeatable growth trajectory that would project it to quickly grow to that number of $130K. By February 22, 2021 Bitcoin’s entire market capitalization was about $1.2 trillion. This was up from an astonishing low of around $100 billion in 2018. This growth rate isn’t realistic in the short term. In reality, it’s extremely improbable that Bitcoin’s market cap will increase a whopping 1000% within 90 days.
Now, let's address the counter-argument: the potential for increased institutional adoption. It's true that more and more institutional investors are entering the cryptocurrency market, which could provide a significant boost to Bitcoin's price. While more institutional adoption is sure to come, it often takes time and unfolds slowly. A dramatic leap to $130,000 within the next three months seems very improbable.
Additionally, regulatory uncertainty still hangs heavily over the cryptocurrency market. Governments around the world are grappling with how to regulate Bitcoin and other digital assets, and any adverse regulatory developments could negatively impact Bitcoin's price.
I’ve lived through, and seen, first-hand the ruinous impacts of bear markets on millions of investors. In German, we refer to them as Bärenmärkte. They happen when capacity outstrips demand, faith evaporates, and values crash. Sharp price declines normally precipitate these downturns. So more investors expect even bigger losses, which causes the further loss, creating a self-fulfilling prophecy.
During times of high uncertainty, investors flock to “safe haven” assets. They go running to safety plays like gold, government bonds, and the biggest and most well-known cryptocurrencies like Bitcoin and Ethereum. Even these assets are vulnerable to the overall market downturn’s impact. In order to come out ahead in a bear market, you’ll have to take a prudent and disciplined stance. I’ve seen thousands of new traders get crushed during these periods. Instead, they tend to make reactive decisions that increase the impact of their losses.
Please don’t misconstrue this as my giving up on Bitcoin being a far more valuable asset long term. I believe it’s worthwhile to take a bit more pessimistic view in the near term. The cryptocurrency market is still in its early adolescence, immature and vulnerable to irrational, dramatic price movements. Quick profits are a powerful lure. As exciting as it may be, I implore investors to remain vigilant and avoid being carried away with exuberance.
It’s important to establish that my position here is not about Bitcoin’s potential, per se. It’s more than just that. It’s about pushing for a more realistic, fact-based approach to investing in this highly speculative asset class. The prospect of Bitcoin skyrocketing to $130,000 in 90 days certainly sounds alluring. I consider it to be a deadly pipe dream that hopefully won’t be realized. Let's embrace a rational perspective, informed by market realities and historical trends, to navigate the exciting yet unpredictable world of cryptocurrency investing.
