With Shattering Prices, Will Bitcoin Ever See Its Height Again?

Cryptocurrency Volatility

If you are an accomplished follower of cryptocurrency price movements, we can both agree the volatility is in a different league. Typically, no specific indices are used to measure asset volatility in the crypto space, but you only need to observe historical charts. Most crypto assets’ charts paint skyrocketing peaks and depressive troughs that succeed each other in quick paces. Sometimes the movements are pretty extreme compared to conventional financial markets.

For instance, Bitcoin’s value rose in 2016 by 125% marking one of the best times for investors within the healthy volatility range. However, months later, in 2017, the price peaked by more than 2000% to hit a new all-time high. The following year, it receded and went down 84% from the ATH.

Many of the forces behind price volatilities in conventional markets are also present for Bitcoin and other altcoins. Demand and supply is the primary determinant of stocks’ price, which is more true for cryptocurrencies. Early last year, Tesla CEO Elon Musk announced they had bought $1.5 billion in Bitcoin, a move that saw Bitcoin’s price surge to new highs of $44,200.

Bitcoin has a fixed supply of 21 million, and there are already close to 19 million Bitcoins in circulation. This means that as more people become interested in Bitcoin, its price will keep rising, more so once the maximum supply is reached. Additionally, Bitcoin uses a mining reward system that allows it to enforce synthetic price inflation. The reward system is popular as Bitcoin halving and involves cutting block rewards by half every 210,000 blocks.

Roughly, the halving happens every four years and marks a drop in the number of Bitcoins produced. It creates a scarcity in Bitcoin as it approaches the maximum supply and helps to maintain Bitcoin’s price.

Unlike traditional financial instruments like fiat and gold, Bitcoin is still in its infancy. We’ve only seen it for over a decade, and the newness partly contributes to the heightened volatility. All new concepts generally take time to become entirely accepted, which is evident with Bitcoin. The asset and the crypto industry, in general, are yet to find their feet as they are still in the early stages of price discovery. Although they have grown in popularity over the last few years, they are yet to become integrated as a traditional asset class. Acceptance and maturity of the asset and the industry go hand in hand, as evidenced when Tesla announced it would be accepting Bitcoin as payment.

Elon Musk commented that his electric car company was ‘most likely’ to start accepting Bitcoin payments, triggering a 6% rise in Bitcoin’s price. However, when he later took a twist and dropped the support for Bitcoin, including denouncing it as a payment method for Tesla, the price crashed.

Bitcoin’s Price Trends

Bitcoin (BTC) price per day from October 2013 to August 3, 2022 (in U.S. dollars)

Source: Coinmarketcap

Bitcoin is currently playing a little bit more the $20,000 mark, according to Coinmarketcap figures. It’s a $40,000 drop from its all-time high in November 2021, but the crypto giant could be in for deeper troughs if its historical data is anything to go by.

Historical data shows that Bitcoin was worth about $36,000 a year ago but was even much lower than it is today in the past, playing below $10,000 two years ago. From the data, it’s easy to tell that 2022 is not the worst year for Bitcoin. It has been dogged with periods of extreme ups and downs, although market sentiments suggest that investors and traders are experiencing intense fear. Strategists now warn that the prices could tumble even further amid the ongoing market collapse.

Ian Harnett, a co-founder, and chief investment officer at Absolute Strategy Research, warns that Bitcoin could tank as low as $13,000. Harnett opines that the world has realized that Bitcoin is neither a commodity nor a currency and not a store of value. The cryptocurrency is undoubtedly in one of its worst price slumps in recent years, but not its demise.

Is There Hope for Bitcoin?

Based on the trends seen in the past, Bitcoin tends to drop 80% from its all-time highs during crypto rallies. In 2018, the coin plunged to about $3,000 after a peak of nearly $20,000. By mid-June this year, Bitcoin had lost more than 70% of its value, and if the current trend acts similar to what we saw in 2018, Bitcoin could plunge further until November and then begin to rally in 2023.

Well, the end of the bearish trend may as well not be around the corner. But typically, we are just in the middle of crypto winter, caught up in the adversity of a global economic crisis. The cryptocurrency crash is notably not an exception, as tech stocks have also plummeted. The financial markets have generally been crushed by the economic turmoil, with high inflation undermining economic growth, profitability, and a series of punitive measures.

A few days ago, the Federal Reserve hiked its benchmark lending rate to hit the highest level since 1994. Other financial authorities reacted with similar moves, including the Swiss National Bank and the Bank of England. The cryptocurrency industry was already shaky, although increasing federal rates only worsens the situation.

However, this could be just an age-old turn of events. As the Federal Reserve relaxes its monetary policies and the levels of inflation fall, the pressures on the cryptocurrency and stock markets will ease and see both markets rebound. Additionally, the global economy has been adversely affected by the Russian invasion of Ukraine, which could end at any moment. Although the war’s end is still unpredictable, at least the world will find solutions to the economic impacts of the war. The US, for instance, is working on its domestic oil supplies to compensate for the banned oil importation from Russia.

How Can Green Bitcoin Mining Help?

The crypto winter comes and goes, and Bitcoin has survived such catastrophic price crashes. But one of the most significant headwinds for Bitcoin is the unsustainability of its mining processes. It was the primary reason for Tesla’s U-turn against the coin, although they still hold $1.5 billion in Bitcoin. According to recent reports, Bitcoin mining consumes about 150 terawatt-hours of electricity annually, more than what the 45 million people in Argentina consume. China issued an outright ban on cryptocurrency and related activities citing environmental concerns.

The overall carbon footprint from Bitcoin mining is high and could get worse should the industry rebound, and Bitcoin prices rise. Fortunately, a host of solutions are put in place, including eco-friendly Bitcoin mining facilities that are already operational. EZ Blockchain is one of the Bitcoin mining companies at the front of it all, providing green Bitcoin mining solutions.

About EZ Blockchain

EZ Blockchain is a blockchain company committed to providing solutions to Bitcoin and mining activities. At EZ Blockchain, we are on a mission to solve the global waste energy problem with the help of crypto mining. We utilize Bitcoin’s high power consumption as a tool to capture leaking methane from capped wells, flared gas, and vented gas.

Our products include fully mobile EZ Blockchain SmartBoxes that are plug and play and fit flexible sizes and types of crypto hardware for rapid deployment. We also provide immersion cooling crypto-mining containers that work in any weather conditions with up to a 40% hash rate increase.