Bitcoin prices tumbled this week, dropping below the key $20,000 support level that has held throughout the current bear market. The world’s largest cryptocurrency declined around 5% over the past seven days, sparking renewed fears that the bottom may not yet be in.
According to Ark Invest CEO Cathie Wood, however, there is still strong fundamental support for Bitcoin’s long-term upside potential. In a recent tweet, Wood highlighted analysis from Ark’s director of digital assets, Yassine Elmandjra, showing that Bitcoin’s hash rate – a measure of the computing power dedicated to mining and processing transactions – recently hit an all-time high.
Elmandjra argued that in terms of raw operations per second, the Bitcoin network is now approximately 500 times more powerful than the world’s top supercomputers. He concluded that despite the negativity from skeptics, Bitcoin is backed by the globe’s most secure and robust computing infrastructure.
Wood has been a vocal Bitcoin bull, with her firm even purchasing a 1% stake in the ARK 21Shares Bitcoin ETF. Her perspective echoes similar comments made by MicroStrategy CEO Michael Saylor back in June, when he stated that “Bitcoin is the only digital scarcity, backed by the world’s most secure computer network.”
Many Bitcoin advocates agreed with Wood’s stance, claiming the network’s computing dominance helps give the cryptocurrency inherent value. Crypto author Eric Yakes clarified that rather than being “backed” by the network, Bitcoin is actually secured by it. The network’s decentralized nature and cryptography are what provide the essential monetary properties like scarcity and security.
Nonetheless, Bitcoin still faces technical risks in the near-term. Analysts broadly expect continued outflows and selling pressure, which could drag prices lower. The key driver to watch is Bitcoin’s upcoming “halving” event in 2024, which will cut the block rewards paid to miners in half.
Historically, these halvings have preceded massive bull runs by constricting Bitcoin’s inflation rate. If the pattern holds, the next halving could kickstart Bitcoin’s recovery back toward its all-time high near $69,000. But prices may languish or decline further until the halving finally occurs.
For now, Bitcoin remains stuck below its 200-week moving average, which has marked the bottom of previous bear markets. Prices need to reclaim this level around $22,500 to convincingly signal that the downtrend is ending. Until then, analysts caution that lower lows are still possible.
The recent fall below $20,000 also brings Bitcoin’s 2021 bull market peak of around $69,000 firmly into focus. From that high, the cryptocurrency has now declined over 70%, meeting the typical threshold for a bear market.
Whether current levels represent “the bottom” is hotly debated, but memories of Bitcoin’s massive drawdowns during prior cycles are keeping both bulls and bears on edge. Bears contend that previous 80% to 85% peak-to-trough declines indicate more pain ahead, while bulls argue that annual returns are still positive over multi-year holding periods.
In the meantime, volatility is likely to remain elevated as traders react to developments like rising interest rates, regulations, adoption rates, and competition from alternative cryptocurrencies. Bitcoin is also displaying a strong correlation with tech stocks, exhibiting similar swings driven by macroeconomic conditions.
But according to Wood, the long-term investment case remains compelling despite the price turbulence. She believes Bitcoin could reach $1.5 million per coin by 2030 based on her firm’s probabilistic models.
Other crypto leaders also remain adamant that Bitcoin’s game-changing properties will drive mainstream adoption over time. The transparency and immutability provided by the blockchain, combined with the digital scarcity made possible by cryptography, present a novel evolutionary step in money.
Regulatory scrutiny remains another wildcard, however, especially as central banks move forward with developing and issuing digital versions of fiat currencies. But if Bitcoin can maintain its first-mover advantage and network effects, the precedent for a truly decentralized cryptocurrency serving as “digital gold” has already been established.
The path forward promises to be filled with volatility spikes and “boom and bust” cycles as mass adoption approaches. Yet for believers like Wood, the long-term trajectory points upward based on Bitcoin’s ability to fundamentally reshape finance.