Over the past few years, as the macro economy has deteriorated, the US central bank has plunged into deep chaos. The international economy fluctuated, and interest rates continued to rise.

On the other hand, the degree of volatility of Bitcoin has recently been noticeably reduced and abnormally stable. This is a common trend in bear markets, but some investors quickly assumed that Bitcoin was no longer volatile. However, this is a very hasty judgment, and as the price of Bitcoin rises, they will all be very surprised.

Bitcoin Falls Below $19,000 Again

Bitcoin price once again retrace below all-time highs in the last cycle and now continues to decline.

Some analysts had hoped that Bitcoin could find support above $20,000 given its psychological significance, but were disappointed with the results that followed.

Will the bear market get worse?

Some claim that the bottom is now, when Bitcoin has bounced around 70% from its all-time high, while others believe the worst is yet to come.

There are many reasons to predict the worst is not to come. The macroeconomic environment is still very unfavorable for “risk-on” assets such as Bitcoin. Inflation remains high, and the possibility of nuclear war looks closer than ever, and central banks around the world are attempting to borrow from economies, pushing asset prices down. This overall suffers.

Also, the grayscale discount continues and is still around 35%. Given that many institutions seeking exposure to Bitcoin use Grayscale, maintaining large discounts on NAV is worrisome as it shows that institutions are in no rush to buy Bitcoin.

In most bull markets, institutional thinking can be read by looking at changes in NAV or GBTC. GBTC has consistently traded at a slight premium to the price of Bitcoin.

The end of the bear market is in sight

On the other hand, there are also quite compelling reasons to believe that the end of the bear market is in sight.

First of all, from the data so far, bear markets tend to last about a year. In fact, the last bear market recorded exactly 365 days from peak to trough .

The Bitcoin hash rate has continued to increase significantly during this period and there does not appear to be any sign of slowing down any time soon. This is very important as it shows that miners are constantly expanding their work and that the network is also evolving.

Central banks will continue quantitative easing

Globally, markets are realizing that central banks have no choice but to continue their quantitative easing and bond buyback programs.

Recently, the Bank of England announced a program of buying its own bonds to calm the market as the 30-year Treasury yield soared above 4% after the new prime minister took office. Then, once the situation stabilizes, the bank announced it would slow down and ideally halt its bond-buying program altogether.

But the market reacted extremely badly to the news, and interest rates eventually rose above 4%.

The Bank of Japan, whose 30-year bond yield is also rising sharply, is telling a similar story.

The Central Bank Digital Currency (CBDC) is coming

Central banks around the world are working to introduce central bank digital currencies, aka CBDCs.

Some countries, such as China and North Korea, have already implemented CBDCs with varying degrees of success.

However, it is unlikely that an outright ban on Bitcoin and cryptocurrencies will be announced in the Western world, and it seems highly unlikely that a centrally controlled, state-issued digital currency will surpass Bitcoin’s UX.

Already, in many countries around the world, individuals are choosing safer alternatives to fiat currencies. This alternative is a neutral and decentralized investment alternative that is neither inflated nor used as a political weapon.

CBDC, which has many principles that are fundamental to cryptocurrencies and the exact opposite principle, can come to an ironic conclusion that maximizes the advantages of cryptocurrencies such as Bitcoin or Monero as they are released.

Government Decisions Only Drive More Investors into Bitcoin

Government decisions to circulate digital currencies are likely to create greater inefficiencies in the market by interfering than if the market were left alone.

Various initiatives introduced over the past few months to interfere with the free market have triggered second and third order effects. Examples include policies such as energy price caps in the UK, rationing in France and Germany, and limited energy use in Norway and Finland.

As central banks around the world continue to become unpredictable, people will naturally flock to assets based on predictability, and currently no asset has more predictable fundamentals than Bitcoin.

 

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