Discount on BTC: When is the Right Time to Buy Bitcoin?

By Binaryx | Binaryx_articles | 4 Nov 2021


Despite the market meltdown in May, Bitcoin’s price has grown by 90% this year, making BTC the most profitable asset in 2021. In this article, we will tell you which contributing factors have driven the rise of the first cryptocurrency in the last 6 months, and what do experts have to say regarding the tendencies of bitcoin’s price for the next few years.

Why Bitcoin has gone up: BTC price analysis for the past 6 months

Rate of return comparison of Bitcoin with several traditional investment instruments in 2021. Source: TradingView

Rate of return comparison of Bitcoin with several traditional investment instruments in 2021. Source: TradingView

For the past six months, Bitcoin has been recovering from the collapse of the cryptocurrency market at the beginning of May 2021, instigated by the cracking down on mining in China. The ban and the sharp criticism of digital assets by China’s government led to a dramatic drop in bitcoin hashrate by 50% and wreaked havoc on the market, causing a plunge of BTC’s price from $60 to $30 thousand. 

The negative trend persisted until the middle of June, but then the price of the first cryptocurrency began skyrocketing again. First, it reached 52 thousand (June 21 - September 6), and then, after a short but significant correction - from $42 to $56 thousand (September 29 - October 11). 

According to analytics of investment bank JPMorgan, Bitcoin was able to recover thanks to the return of institutional investors which have observed several positive aspects: 

  • The assurance of Fed Chair Jerome Powell that he is not going to follow in the footsteps of China and ban the use and mining of cryptocurrency.
  • The rapid growth in the popularity of Lightning Network and solutions for P2P payments, that have been facilitated by the implementation of bitcoins into the world economy.
  • Raised concerns about inflation growth amid institutional investors and large private companies.

The future of Bitcoin: will BTC Substitute other projects or remain the first cryptocurrency?

Most leading experts in the crypto industry predict that the status quo will be maintained: BTC will remain the major store of value, while other projects will be used to extend the scope of application of the technology. Moreover, investors will continue to use bitcoins as the main “intermediary currency” in the operations of conversion fiat to altcoins and vice versa.  

Meanwhile, the role of Bitcoin as a digital counterpart to the US dollar will likely be further reinforced, as SEC might shortly approve bitcoin-futures ETF. According to Eric Balchunas, SEC will order the permit to be granted any time soon. Eric names ProShares as pioneers, while AdvisorShares, VanEck, Galaxy Digital, Invesco, Valkyrie Investments, and other contenders will acquire the relevant permission a bit later.

It should be noted that Canada and Brazil have already approved the launch of an ETF based on bitcoin technology.

 

Will Bitcoin undergo correction or fly to the Moon?

In the short term, the price of Bitcoin, as well as other cryptocurrencies will likely continue its rally due to the current favorable conditions. First, the world inflation will not pass away, but continue to grow in view of the fact that the price of microchips is steadily increasing, which will consequently result in increased prices on equipment and services associated with it - from prices on smartphones to logistics costs.  

Second, the Bitcoin chain is to introduce the Taproot update, intended for more efficient and confidential transactions.  

“Today, most investors are focused on the Bitcoin’s update called Taproot. It’s supported by almost all mining pools, so if everything goes smoothly, we’ll see the next rise of the asset”, says Maksym Prykhodko, Risk Manager of Binaryx digital asset exchange. “Now Taproot is supported by 84% of mining pools - all major players, except for AntPool. So one can hardly expect another Bitcoin hardfork”, underscores Maksym Prykhodko.

Third, the fourth quarter has always been rewarding for Bitcoin. As you can see in the table below, the last quarter of the year - the period from October to December - often ends with the high rise in Bitcoin’s price, so in the coming three months we can expect that BTC will jump to $80-100 thousand, says CEO of the Swiss company Newcent, Vladimir Smetanin. 

“From the end of February through the middle of March bearish trend traditionally prevails in the market, and this time each year markets undergo corrections… In 30-45 days we expect the rise of Bitcoin up to $60 thousand and higher”, explains Vladimir Smetanin.

History of Bitcoin monthly returns since 2013. Source: Bybt

History of Bitcoin monthly returns since 2013. Source: Bybt

The only factor that can adversely affect Bitcoin’s price is the meeting of the Federal Reserve System (FED) in November, which is expected to introduce quantitative easing (QE) and progressive drawdown of urgent stimulation of the population and business during the Covid-19 pandemic.  

The truth is that investors already knew about this in September, so we have every reason to believe that these procedures were envisaged and the correction, even if it happens, is expected to be slight.  The collapse can happen in case FED embraces a heavy-handed approach causing an abrupt and massive outflow of capital from risk assets (and bitcoin is one of them). However, the experts consider the likelihood of the scenario occurring is low, as FED hardly wishes to prompt the global market correction and the following crisis. 

Moreover, large institutional investors won’t allow bitcoin to drown completely, for they invested billions of dollars in this technology and the possibility of conversion into fiat, shares, or gold seems rather remote due to inflation expectations. 

 

***

So the answer to the question “When is the best time to buy bitcoin?” - is either right now, or in the next few weeks, for in the near future investors are likely to pump Bitcoin’s price ahead of the Taproot and FED meeting. After that, the correction and further seasonal rise of bitcoin will follow, which is predicted to conclude at the beginning of 2022.  

In the long-term bitcoin’s price is also projected to grow, as its deflationary nature can protect capital against inflation processes. That’s why you can make a deposit and set it aside for 3-5 years, just like Tesla, MicroStrategy, Square, and many other institutional investors did. 

 

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Binaryx is a digital asset exchange established in 2019 that enables buying, exchanging, and storing cryptocurrencies and other digital assets. www.binaryx.com


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