Will Bitcoin Rise Again?

Bitcoin has been advancing again after an uncertain week with a significant surge in trading on March 13 bringing BTC over 24k per coin (up 10% from March 10). This quick recovery is positive for investors that have held their positions over the last year when the value was more than double its current price (47k in late March 2022). BTC has weathered many storms and the current challenges in the financial world won’t be able to keep it down. Nonetheless, it is not likely that we will see a return to the 40k level in the near future and for several reasons. 

Bank Failures

Last week, two extremely crypto-friendly banks, Silvergate and Silicon Valley Bank (SVB) folded and a third, Signature Bank, was seized by US regulators on Sunday evening, March 12. Silvergate and Signature, in particular, were important players in providing liquidity to many crypto exchanges and businesses whereas SVB held deposits for several crypto related startups. 

While the US government has stepped in to guarantee deposits for Signature and SVB, it can’t guarantee the liquidity that these banks were providing. This could create some downward pressure on BTC and other assets going forward if investors choose to exit the crypto market while there is still cash to take their positions. 

Current Financial Crisis

Some of the largest economies in the world are officially in a recession or denying that they are in a recession. Whether mainstream media outlets want to make some kind of formal announcement and give it a proper name like we’ve seen in the past – dot com bubble, housing market crisis, etc. – is irrelevant. Energy and food prices are rising, increasing the costs of living for consumers and businesses. The US, Germany, the UK, and many other Western nations are facing “stagflation”. 

If you’re unfamiliar with the term, it is when an economy encounters shrinking GDP and increasing prices at the same time. Usually, these two metrics work inversely, but when they move in parallel, it isn’t pretty for regular people outside the ultra-wealthy. 

When normal people and small businesses start feeling tough financial pressure, they usually begin to cash in investments. One of the first asset classes which will be liquidated are crypto investments – at least while there is some liquidity as mentioned above. When that liquidity becomes problematic, we will see “fire sales” in which prices will drop dramatically. If you’d like to see some examples, just take a look at 1970s financial footage for the US and UK.

Some Good News

One of the benefits of the financial uncertainty in the world is that prices for many assets will drop, including Bitcoin. This can present excellent opportunities for savvy investors that have the luxury of waiting for their investments to improve in the long term. 

Look for BTC to have several plunges and be prepared to accumulate more coins when this happens. Bitcoin may not reach 40k this year, but it has shown that it can push through difficult times and those investors that have “HODL’d” have yet to be disappointed.