Over the past several months, crypto has been experiencing some hard times.
Traders have been torn between whether or not this is a mid-cycle correction or a bear market, and there’s no telling yet who’s right.
However, there is some cause for optimism. At the very least, the worst of it is over, and some experienced investors are beginning to load up in preparation for what comes next.
Let’s cover some reasons why crypto could quickly turn around and boom once again.
Money printing – Is there any other option?
It’s no secret to experienced crypto traders, like those who trade on NAGA, one of the best crypto trading platform, that central banks printing money drives crypto prices higher.
We only need to look at what happened in 2020 to see this. After a flash crash, central banks turned on the money printers in response to the public health crisis, and crypto prices went crazy. Bitcoin itself went up almost 20x from the bottom to its peak at over $60,000, and some currencies, such as Cardano, went up by over 100x. These gains can rarely be found in any other market.
While central banks, led by the Federal Reserve, have been tightening up to fight inflation recently, some analysts think they’re merely ‘reloading the cannons’ so they can cut interest rates again and cause another boom.
Why would central banks do this? With a cost of living crisis biting almost everywhere, Europe facing record energy prices, and the Chinese markets facing their own challenges, the need for massive stimulus could once again be on the horizon.
While not everyone agrees with this thesis, it does explain why Jerome Powell and the Federal Reserve Board chose to raise rates so aggressively. After all, you can’t cut from zero, but you can cut from interest rates of 2.5% or more, and markets almost always respond positively to interest rate cuts.
The long-term value thesis
With inflation rearing its ugly head like it hasn’t for several decades, more and more people are thinking that BTC as a store of value makes sense.
For those who don’t know, nobody can print more Bitcoins. There will only ever be 21 million coins, and they’re released on a fixed schedule. The new coins distributed in each block gets cut in half every four years (210,000 blocks, to be precise). The last time that happened was in 2020, and it’s due to happen again in June 2024 or thereabouts.
This schedule means BTC is always getting rarer, and in and around the ‘halvings,’ the race is always on to get in ahead of the crowd. Currently, there are 6.25 BTC in each new block, and as of mid-2024, there will only be half of that.
So, at a time of record inflation, BTC is getting even more scarce. Many see a dramatic price rise as a logical certainty when these two events collide. The reasoning goes that, so far, BTC has been the best-performing asset of all time. Why wouldn’t that continue as it gets even more scarce and fiat becomes more and more abundant?
BIG players are entering the game
For years, BTC advocates have been arguing that institutional money is going to enter the space in a massive way. So far, it has been difficult for big money, such as pension funds, to get in on crypto trading because of regulations restricting what they can buy.
However, while a spot ETF might still be some ways off, financial giant BlackRock recently announced it is partnering with Coinbase to allow institutional investors to buy in safely.
Crypto market watchers speculate that if large funds assign even a fraction of a percent of their capital to BTC, the price will explode. It’s difficult to imagine BlackRock setting up something like this unless they know there’s a market. Indeed, BlackRock said its institutional clients are “increasingly interested” in Bitcoin and crypto.
BTC holding up despite global market chaos
Lastly, BTC bulls point to the fact that, despite global market meltdowns, including in the wider crypto markets, BTC is holding up relatively well. It has dipped below $20k several times, but it’s always met with massive buy orders, and it never stays there for long.
Some interpret this as the world realizing BTC is here to stay and recognizing that at its current price, it’s fair value.
Nothing is guaranteed, but it’s looking good
While anything can happen in crypto, and there are no guarantees when it comes to financial markets, it seems likely that the worst of it is over for crypto. With massive drawdowns on many altcoins and a 70% retracement in BTC, many long-term bulls are starting to build a position for the next run. Anyway, for those who wants to inverts on crypto and has not enough experience, the Auto copy trading is such an interesting idea.
If the thesis that central banks will soon start to print money again turns out to be correct, there could be fireworks in the crypto markets soon! Traders should prepare accordingly.