Is Bitcoin lost at the crossroads of the bull and bear markets? Let’s hear what the experts say

Since the beginning of the year, investors have been watching the upcoming Fed rate hike. The additional pressure from potential conflicts between Ukraine, Russia and NATO countries has added more pressure to an already uncertain market. Bitpush terminal data shows that over the past few days, Bitcoin has traded between $41,500 and $43,000. In the past 24 hours, Bitcoin fell below $43,000 again and hovered around $42,300 , with a daily volatility of around 1%. As prices continue to consolidate and lack upward momentum, the waiting game for crypto players continues.

Experts believe that Bitcoin's trend may continue to be tested this week as investors watch political developments between Ukraine and Russia and weigh the possibility of the Federal Reserve raising interest rates by 50 basis points in March.

Bitcoin has long been viewed by early investors and enthusiasts as a safe haven asset — ideally, one that can offset risk in a portfolio and limit exposure to negative shocks.

However, in recent months, bitcoin has moved similarly to stocks, particularly riskier growth stocks. Bitcoin is still recovering from a sharp drop earlier this year, when rising interest rates led investors to sell positions in technology and other risky assets.

Yuya Hasegawa, market analyst at Japanese exchange Bitbank, told CNBC: "Bitcoin, which is labeled by some as a stateless currency, has indeed performed well in the past amid geopolitical tensions, so we can expect some demand as a safe-haven asset. However, the change in the landscape makes Bitcoin vulnerable to fluctuations in the U.S. stock market, so Bitcoin investors may not be able to feel reassured until the situation on the Russia-Ukraine border begins to stabilize."

Crypto winter could last for months

Data from the Bitpush terminal shows that the price of Bitcoin has fallen by about 10% since 2022 and by about 38% from its historical high in November.

In a rising interest rate environment, tech and growth stocks are likely to struggle for some time. This means that if we are in a crypto “winter” (i.e. a longer bearish period) now, it could last for several months.

“If we’re in a bear market, we’re going to see another eight or nine months of sideways decline [movement], which is an opportunity for the speculators to leave the market and for the real players to continue to build this technology,” said Chris King, CEO and founder of Eaglebrook Advisors.

Katie Stockton, founder of Fairlead Strategies, said that resistance at $46,730 should hold this week, with support near $37,360, but Bitcoin will not be tested in the short term.

Crypto veterans who have seen the big waves say this consolidation is just a "piece of cake." Bitcoin has only experienced one true crypto winter before: in 2018, the price fell about 80% from its then-all-time high. Since then, the market has changed significantly.

Get ready for the next bull run

The low tide period is when the industry cleans up and builds infrastructure and applications, which will make it easier for newcomers in the next bull market. Decentralized Finance (DeFi), Non-Fungible Tokens (NFT), Metaverse, etc., people have a strong interest in new crypto fields other than Bitcoin.

In an interview with CNBC, Prime Trust CFO Rodrigo Vicuna said: “The use cases for adoption are evolving rapidly and we are just beginning to scratch the surface of where many of the blockchains are headed.”

For example, investor interest and funding for NFTs has boomed in 2021. Most people still only see them as digital art, a concept that many people struggle to understand. People also overlook other potential uses for NFTs, for example, NFTs of house deeds can provide a history of property ownership, and NFT medical records can provide patients with a secure way to share information with their doctors.

King noted that despite the new interest in DeFi, which allows users to use blockchain to engage in lending and other financial activities without any middlemen, its takeoff is still premature and underdeveloped.

King gave an example: "In some of our strategies, we are very bullish on DeFi. DeFi is still speculative. The infrastructure is still under construction, cumbersome and difficult to use. Bitcoin was difficult to buy from 2013 to 2016, but companies like Coinbase and Gemini made it easier. DeFi needs this entry to improve it and make it less speculative, it just takes time."

As Bitcoin cycles lengthen and returns diminish, other crypto assets play an important role in broadly onboarding new people into crypto and increasing adoption. Bitcoin itself has yet to find its killer app, but increasing adoption will drive that process.

“The most important thing we’re focusing on and looking at from a short-term and long-term perspective is adoption,” King said. “That’s really important, and like with Facebook, Instagram and Uber, the hype and price increase around these assets leads to more users joining the network, which is ultimately what we care about most.”

Author: Mary Liu