Bitcoin nears $100k: history repeating or a new chapter in crypto?

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As someone who has closely followed and invested in Bitcoin since its early days, I must say that the current state of the world’s most renowned cryptocurrency is nothing short of astonishing. The meteoric rise of Bitcoin to over $93,000 and the influx of institutional investment are reminiscent of the tech boom I witnessed in the late ’90s.

As an analyst, I’m thrilled to report that Bitcoin (BTC) is almost breaching the seemingly unattainable $100,000 mark, having started at just $0.0009 in 2009. Even a few years ago, only the most forward-thinking in our industry dared to imagine Bitcoin approaching such heights; yet, that dream is still within reach, albeit with a slight dip below $99,000 over the past week.

Let’s take a look at previous records of Bitcoin’s peak prices and compare the current phase with these cycles in terms of growth path. By studying the patterns that influence Bitcoin’s record high performance, we can better assess if history could potentially reoccur.

The main point is: will it happen again, or are we witnessing an extraordinary event—much like Ray Kurzweil’s prediction of artificial intelligence surpassing human intelligence? Could it be that Bitcoin, similar to AI in his scenario, has ventured into uncharted waters, pushing us to envision a future beyond our current comprehension?

Table of Contents

Bitcoin’s boom-and-bust cycles: a historical overview

The price fluctuations of Bitcoin have typically involved dramatic increases to unprecedented peaks, which are then followed by substantial decreases. Below is a summary of significant peak prices and their subsequent events.

Since 2013, the leading cryptocurrency experienced significant fluctuations. In April, it peaked at $266, but plummeted roughly 75% to approximately $65 within a brief span. Towards the end of the year, it astonishingly rose to $1,150 in December, followed by a lengthy bear market that saw its value drop around 85% to $170 by early 2015. Market speculation, regulatory uncertainties, and the demise of Mt. Gox were believed to have contributed to these price swings.

Moving forward on the winding path of ups and downs, in the month of December 2017, Bitcoin peaked at an astounding record high of $20,000. This surge was driven by a retail investment craze and the burgeoning trend of Initial Coin Offerings.

Subsequently, there was a significant decline, with Bitcoin falling by 84% to reach its level by December 2018. The speculative bubble surrounding ICOs burst like a fragile structure, as the inflated expectations of projects were not met, leaving investors disillusioned after being initially overhyped and eventually let down as fraudulent schemes were exposed.

Initially, pump-and-dump schemes seemed to be a substantial factor, but they were just one piece of the puzzle. At first glance, the Initial Coin Offering (ICO) market was booming rapidly, but soon became problematic when the Securities and Exchange Commission labeled numerous ICOs as unregistered securities. This declaration put even promising ventures in a tough position, struggling to remain viable.

Due to excessive competition and investors growing tired, these issues caused the ICO market, which had been thriving, to crash. This downturn erased billions of dollars’ worth of value and pulled Bitcoin’s price down to levels not seen since the earlier cycle, leaving it at $3,200 by the end of 2018.

The swift expansion of that market led to a point where it was fully utilized, causing an extended period of decline in the crypto market, often referred to as ‘crypto winter,’ that persisted until mid-2020. Following this, Bitcoin and other digital currencies started another substantial surge.

Despite the harsh impact of the economic downturn, it seemed as though this setback might be a fortuitous circumstance. This is because the bear market prompted serious blockchain projects to concentrate on construction and improvement. It was during this period that the foundation for groundbreaking innovations such as decentralized finance and non-fungible tokens was laid, which would eventually flourish in subsequent cycles.

2021 saw Bitcoin’s value fluctuate wildly between peaks and troughs, with two unprecedented record-breaking highs and steep declines. In April, Bitcoin soared to an all-time high (ATH) of $64,000 due to increasing institutional investment and buzz surrounding the crypto sector.

Initially, by July, it had dropped a staggering 50% to reach $30,000 due to profit-taking and worries about regulatory scrutiny. Later in the year, there was a recovery, peaking at another all-time high of $69,000 in November, but this surge proved temporary.

After a long period of bear market, Bitcoin dropped approximately 77% to reach $15,500 by November 2022. It’s clear that unexpected events have often burst the bubbles in Bitcoin’s speculative growth. The crash from 2021 to 2022 was a particularly severe combination of increasing interest rates and the failure of notable cryptocurrency companies like Terra and FTX.

History seemed to be repeating itself as the market following 2022 took a downturn, emphasizing the need for regulatory certainty, efficient layer-2 solutions, and robust infrastructure suitable for institutions. This setup the crypto industry for its current expansion period.

Bitcoin’s growth phases have been expanding over time, with durations going from approximately 334 days in 2013 to about 1,065 days in 2017 and 610 days in 2021. Additionally, the correction periods have remained relatively consistent around one year for recent cycles, indicating a pattern towards longer, more stable market stages as the cryptocurrency market continues to mature. This suggests that Bitcoin’s growth cycles and corrections are becoming less frequent but more sustained over time.

As institutional investors moved to steady the market, the amplitude of fluctuations lessened significantly, despite the fact that corrections continued to be substantial.

What sets the current cycle apart?

It seems that Bitcoin, once considered a hoax, trend, or unworthy of Wall Street’s attention, is now demonstrating its skeptics wrong. The discussion surrounding Bitcoin has evolved significantly, moving away from viewing it as a speculative asset and towards recognizing it as ‘digital gold’ or a long-term investment for preserving value.

By November 2024, a remarkable sum of $30.814 billion has already been invested into Bitcoin Spot ETFs this month, with major financial institutions such as BlackRock, Fidelity, Valkyrie, VanEck, Invesco, Bitwise, Franklin Templeton, WisdomTree, and ARK Invest contributing to the significant cumulative net inflows. The month is still ongoing.

These Exchange-Traded Funds (ETFs) have shown a high level of daily engagement, with BlackRock being the top performer, amassing approximately $31.333 billion throughout the month. Fidelity comes in second with around $11.538 billion, and Bitwise takes third place with $2.432 billion. The influence of these ETFs has notably decreased market volatility and strengthened overall stability.

Furthermore, a growing number of public companies are integrating Bitcoin into their financial reserves. Combined, these companies, predominantly American corporations, currently possess about 361,991 Bitcoins, equivalent to 1.83% of the total Bitcoin supply. This amount is roughly valued at $34.76 billion, as reported by CoinGecko’s data.

MicroStrategy continues to dominate as it owns a staggering 252,220 Bitcoins, which amounts to more than 70% of the digital currency held by publicly-traded companies. This massive holding equates to approximately 1.201% of the total number of Bitcoins in circulation.

As a crypto investor, I find it intriguing to note that after MicroStrategy, Marathon Digital Holdings secures the second spot with 26,842 Bitcoins, while Galaxy Digital Holdings takes third place with 15,449 Bitcoins. Tesla still holds a substantial position in fourth, owning 11,509 Bitcoins.

As per the Sygnum Future Finance 2024 study findings, it appears that more institutional investors are considering digital assets as essential elements in their investment portfolios. Notably, about 57% of these investors plan to increase their allocations, and a significant 81% are actively looking for more comprehensive information to help them make informed decisions regarding their strategies.

According to the Glassnode report, institutional investments, primarily from U.S. Spot ETFs, are significantly influencing the Bitcoin market. These investments seem to be smoothing out price fluctuations and countering sell-offs. In the past month alone, ETFs have purchased approximately 128,000 BTC, which is equivalent to about 93% of the 137,000 BTC that long-term holders sold during this period. Furthermore, weekly investments into Bitcoin ETFs have skyrocketed to around $1–2 billion, contributing significantly to maintaining market liquidity and boosting the price to reach $93,200.

Despite the fact that long-term investors hold approximately 14 million BTC, their increased selling (profit-taking) could potentially hinder the growth of institutional interest. This institutional demand is crucial in deciding if the current surge can continue to accelerate.

The Bitcoin road to $100,000

According to Bitcoin options data, there’s a prominent emphasis on higher price points, as demonstrated by high levels of activity around the $100,000 and $120,000 mark. At the $100,000 price point, there are 20,600 call options bought versus only 1,530 put options sold, suggesting a robust optimism among investors. This implies that many traders expect Bitcoin’s price to rise rather than fall in the near future.

The calls market value stands at $159.45 million, significantly outweighing the puts market value of $13.43 million, with a total notional value of $2.12 billion.

In a similar vein, the $120,000 price level indicates 18,310 call options versus 764 put options, representing a combined notional value of approximately $1.83 billion. The significant number of call options at such high prices underscores the widespread bullish sentiment in Bitcoin’s potential to reach or surpass these values.

Closing thoughts

The path that Bitcoin has taken towards reaching $100,000 is truly impressive, as it combines traditional trends with unparalleled institutional acceptance and market growth.

Remarkable achievements have been made, for instance:

Regardless of whether Bitcoin’s surge mirrors past trends or blazes new paths, there’s little doubt that reaching $100,000 is no longer a matter of “will” but “when.” The intriguing question lies in how far the world will adopt it as it pushes the boundaries and tests the very core of established structures.

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2024-11-26 03:43