In spite of Bitcoin’s rapid growth this year, I don’t believe we’re in a bubble yet. I predicts that BTC will not fall below $60K in the future, but we can see a bubble at $85K. Unlike previous predictions, I do not believe however, we’ll see BTC going above $100-150K. This is because the massive influx of long-term investors in the market makes it less speculative and more predictable. The drawdown of the BTC rate after the highs may be much weaker than in previous years, or even absent altogether.
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Bitcoin's Rapid Growth Might Be Replaced By A Long Flat
Gregory Klumov, CEO of STASIS, EXANTE's sister company, adds: "A significant part of market participants (primarily retail) believe that a bubble and a deep recession are inevitable, so it is important to seize the moment to consolidate profits at the maximum. But it may turn out that this time the growth will be replaced by only a slight correction, or even a long flat."
The growth of the crypto market in 2021 is currently repeating the patterns of 2013 and 2017. However, history shows us that the bull market was preceded by the halving of bitcoin (in 2012, 2016 and 2020), and in all cases the records of previous years were repeatedly broken, although the volatility fell each time.
In 2013, BTC rose 50 times in price, after which it collapsed by almost an order of magnitude. In 2017, BTC has risen in price 20 times, after which it has fallen in price by 6 times for the crypto winter. In the first quarter of 2021, BTC doubled in price, but further forecasts are very different. According to conservative estimates, BTC will rise in price only up to $70-80K, and according to radical estimates - up to $300-500K. There is even more uncertainty in the estimates of the start of the recession and its depth.
The key difference between HYIP 2021 and HYIPs 2013 and 2017 is that most market participants are aware of the long-term positive trend in BTC and invest a significant part of their capital long-term. In 2013 and 2017, this was not the case.
A Predominantly Speculative Market
During the past HYIPs, people knew that in previous years, the cryptocurrency was rapidly becoming more expensive, but doubted that the growth would last long. There was something of the dot-com bubble in that growth, the deflation of which ruined many, and the sector was restoring records for another 10-15 years. In 2017, there were big doubts that the cryptocurrency would be accepted by the state and the existing financial system. Attempts to persecute cryptocurrencies have been undertaken in many countries from small El Salvador to the de facto crypto leader China. The market was predominantly speculative: buy a super-volatile asset and sell it on time.
Today we are in a fundamentally new situation: the 4-year cycles of bitcoin are already common knowledge. Investors know that BTC regularly inflates bubbles, after which the rate is still much higher than before the bubbles. This fundamentally distinguishes the situation from the dot-com bubble: for an investment to be profitable, it is not necessary to sell it at its peak. Within 3 years after the peak, the old BTC records with a high probability will not only be repeated, but will also be updated. Of course, the overall profitability of the "buy and hold" tactic is lower than that of speculation, but speculation has its own risks associated with the premature sale of an asset before the peak. Anyway, there are serious reasons to believe that today the share of "holders" in the market is much more than in 2013 and 2017.
Bitcoin Each blowing of BTC bubbles (not only in 2013 and 2017, but also in 2019) was a test of market participants for endurance.The deflation occurs until there is an obvious shortage of sellers in the market. For example, the capitalisation of BTC during the crypto winter 2018-2019 is, in fact, the contribution of holders, who until the last held assets and did not The price bottom of BTC, below which it is almost impossible to collapse (with the exception of March 2020), approximately doubles every year. its capitalisation. Consider 4 periods when the market was presumably near the bottom. This is a significant part of 2015-2016 (when the 2013 bubble had already deflated, but the 2017 bubble hadn’t yet revealed itself), crypto winter 2018-2019 and the bottom of the bear market at the end of 2019.
| Year | Rate in early December | Capitalisation in early December |
| 2015 | $ 400 | $ 5B |
| 2016 | $ 750 | $ 12B |
| 2018 | $ 3500 | $ 60B |
| 2019 | $ 7200 | $ 130B |
Exponential growth in the rate and capitalisation of bitcoin in “non-hype” periods
The Capitalisation Of Bitcoin
Over the year, the rate and capitalisation of BTC approximately doubled. Between 2016 and 2018, the difference is, respectively, close to 4 times. This is due to the fact that the emission of BTC is small, and the number of market participants is growing exponentially. BTC supply is almost constant, while demand doubles regularly. Knowing this pattern, you can roughly estimate the non-speculative share of capitalisation during HYIP periods. For example, in December 2017 it was supposed to be about $30B, in June 2019 - $90B, at the end of 2020 - $260B. Real capitalisations during these periods reached much higher values due to speculation: $280B, $235B, $540B.
Will there be a bubble when it starts and how will it end?
If you believe this pattern, then it is not difficult to estimate how the bubble will end (if there is one). Last time, the deflation lasted one to one and a half years. The bottom can be reached, for example, in December 2022, then the price and capitalisation of BTC will be $60K and $1.1 trillion. If it lasts until June 2023 - then $ 85K and $15T. The recession is unlikely to last longer.
Knowing these numbers, we estimate that the bubble may start right now, in the spring of 2021. Its border is located in the specified range of $60-85K.
If the market consisted of only "holders" and was guaranteed to follow this pattern, then there would be no bubble. The market would reach these levels, after which buyers would lose interest. After all, if everyone knows that in the future BTC will fall in price to $60-85K, then buying at a higher price is unprofitable.
Uncertainty In The Market
But in reality, there is a high degree of uncertainty in the market, and no one canceled speculation. About half of the capitalisation of BTC today is accounted for by institutional investors, who, although they have a long-term focus, have professional traders in their staff and play on fluctuations in rates. Uncertainty, in turn, leads to the FOMO factor: many investors who have not had time to buy BTC cheaply will prefer to buy it even for $ 100K, so as not to be out of the game.
The combination of these factors fuels the expectations of investors that there will still be a bubble, and it is possible to make money on it at least speculatively. These expectations may well bring the BTC rate to $100-150K, although the values of $300-500K now seem less realistic. This is in line with recent forecasts from a number of major US banks (eg $130K from JP Morgan). Accordingly, the inflation of the bubble after the highs will be much more modest than in previous years: 2 times or even less.
Can a bubble stop being a bubble?
What is BTC really overheats and reaches $100-150K, however, a collapse does not occur. Instead, a multi-year flat begins without a pronounced positive or negative trend. By the summer, a situation similar to what is observed on the US stock market today could replicate itself in the crypto market.it cannot be ruled out that after $100-150K, the BTC rate will stabilise for several years. During this time, market coverage will grow, making the initially “overpriced” asset increasingly “fair” and protected from collapse.
Article By Victor Argonov, senior analyst at International Investment firm EXANTE
