Bitcoin plunges 20%, but bulls are more optimistic? Reiterate the target price of $100,000 by the end of the year

Source: Cailianshe

Author: Liu Rui

From last weekend to Friday, Bitcoin experienced two rounds of rapid dives, falling nearly 20% from its previous historical high of nearly $65,000 to around $48,000. Although this caused the evaporation of hundreds of billions of dollars in market value, some analysts said that the possibility of Bitcoin rising to $100,000 before the end of the year has not decreased - even after this "healthy" correction, it can strengthen the bullish reasons.

Is the pullback for a better rise?

David Grider, chief digital asset strategist at Fundstrat, believes that this time will not necessarily repeat the situation of 2017, when Bitcoin once rose to its then-all-time high before plummeting 80%. He said: "It is more important that the market has to have a healthy cooling period before it can move forward."

Other bulls agree with Grider and see a big rally ahead for Bitcoin. Many point to Bitcoin's boom-and-bust cycles as being tied to the mechanics of the Bitcoin code, which automatically cuts the rewards paid to Bitcoin miners in half approximately every four years, an event known as a halving. In May 2020, Bitcoin experienced its third halving, when miner rewards automatically dropped from 12.5 Bitcoin to 6.25 Bitcoin. Historically, Bitcoin's price has experienced a prolonged rally after each halving. After the second halving, Bitcoin rose nearly 3,000% over the next 18 months.

In addition, many technical traders pointed out that a "stock-to-flow" model related to Bitcoin's halving suggests that Bitcoin's rise will continue.

This model has performed very well in tracking and predicting the price of Bitcoin over the years, and accurately predicted a year ago that Bitcoin would rise to $62,000 in April this year.

Dan Morehead, founder of cryptocurrency investment firm Pantera Capital, said in his assessment of Bitcoin that he was surprised that the price trend of Bitcoin was so consistent with their predictions. According to this model, Bitcoin will rise above $100,000 in mid-July this year and rise to $115,000 by August.

Another well-known Bitcoin technical analyst pointed out on Twitter that if we trace back to 2012, we can find that Bitcoin's long-term price performance is very consistent with the "stock-to-flow" model prediction, and the recent correction of Bitcoin prices has even brought it closer to the model, which in turn makes bulls more reassured. He said: "For a while before, I thought we were ahead of the model and the super cycle had begun, but now everything is back to normal..."

Morehead also pointed out on Twitter that for every million users added to the Bitcoin market, the price of Bitcoin will rise by $200. In the past historical records, this rule has been fulfilled except in February 2016. According to this rule, Bitcoin will rise to $200,000 in 2022.

Other reasons to remain bullish on Bitcoin

Glider said that if you compare other digital currencies, you will find that Bitcoin's strength will continue. While Bitcoin has fallen nearly 20% recently, Ethereum, the second largest cryptocurrency by market value, has only fallen about 5% from its recent high.

“I think one thing that gives us some confidence that we’re still in a secular cycle is that if you look at other large digital assets like Ethereum, they’ve been relatively strong even as Bitcoin has pulled back… So I think that’s a strong sign that this is just capital flows within the market and not a massive flight of capital,” he said.

If there is any difference between the current situation and the previous massive Bitcoin plunge, it is that Wall Street institutions and large companies have recently undergone a huge shift in their attitudes towards digital currencies. According to the latest documents submitted to regulators, this week, Morgan Stanley announced that its new cryptocurrency fund raised nearly $30 million from more than 320 investors in just 14 days. At the same time, Goldman Sachs is also committed to rapidly advancing investment channels for Bitcoin and other digital assets for wealth management clients.

From a regulatory perspective, the U.S. Securities and Exchange Commission (SEC) has officially announced that it has received the third active Bitcoin ETF application and is reviewing it, which means that hopes for the first Bitcoin ETF in the United States are growing.

Given these arguments, Grid reiterated his $100,000 price target for Bitcoin, but acknowledged that volatility may continue in the short term.

“I think if you’re a trader, maybe you might consider (the short-term volatility of bitcoin),” he said. “But if you’re an investor with a longer-term view, I think there’s still a reason for you to continue to be involved in cryptocurrencies.”