Key Facts: There are 2 types of bitcoin investors, says CryptoQuant CEO. Bitcoin’s features would make it decoupled from traditional assets. Bitcoin (BTC) was created in 2008 by Satoshi Nakamoto as “a peer-to-peer electronic cash system.” But we are far from those early days. Today, bitcoin is a globally recognized financial asset that is listed on major exchanges and held in the treasuries of numerous multi-billion dollar companies. In 2024, Bitcoin will be a globally recognized financial asset that is listed on major exchanges and held in the treasuries of numerous multi-billion dollar companies. Bitcoin is far from being a niche product, as it was in its early dayswhen it only caught the attention of cypherpunks, libertarians, crypto-anarchists and technologists. For this reason, Bitcoin is often classified as a risk asset, just like stocks.. This means that the price of bitcoin is often correlated with that of traditional financial assets such as the Nasdaq index or the S&P500, among others. This reality, which had been evident, for example, during the COVID-19 crisis, became evident again recently. As BitcoinDynamic reported, the financial crisis of the Japanese stock market spread globally and came to affect bitcoin and cryptocurrencies. In the following graph, which shows the price of BTC since January 2024, you can see the drop it has had in the last week:
Bitcoin price since January 2024. Source: TradingView.
“The bear market could last 10 or 20 years”: Avi Gilburt
Although the future is uncertain, many analysts are willing to make projections about how the global stock market crisis will evolve. Some, such as John Higgins, chief market economist at Capital Economics, think that the stock market crash is just a correction within an upward macrotrend. Higgins makes a historical analysis of financial crises and says:
«It feels less like 2000, when the dotcom bubble burst, than 1998 when a temporary pullback in share prices coincided, as now, with a resurgence of the yen.» John Higgins, chief market economist at Capital Economics
But not everyone is so optimistic. BitcoinDynamic reported yesterday, August 5, the words of Avi Gilburt, who runs the ElliotWaveTrader company. Based on technical analysis, Gilburt concludes that “the bear market could last 10 or 20 years.” A bear market of such duration might seem crazy to some. But, if we look at a historical chart of the S&P500 index, we see that, although the general trend is bullish, it has had bearish periods that extended over several years.
S&P500 index price over the course of history. Source: TradingView. For Gilburt, the S&P 500 will fall to around $3,500-$3,800 fairly quickly. In his view, the US election will not have much impact on asset prices. Quoting economist Alan Greenspan, he said: “It doesn’t matter who the next president is. The world is governed by market forces.”
Bitcoin: Digital gold or risky asset?
And what would happen to Bitcoin in a “catastrophic” scenario like the one Gilburt predicts? Bitcoin's behavior will depend on which narrative dominatesKi Young Ju, CEO of the analysis firm CryptoQuant, explains that “investors are divided.” There are some who see bitcoin as a technology stock and others as digital gold.
“Digital gold believers are holding steady, while tech stock believers are panicking, selling and switching to gold amid a bad macroeconomic backdrop.” Ki Young Ju, CEO of CryptoQuant
According to the South Korean entrepreneur, the narrative of bitcoin as digital gold is the one that should end up prevailing. “BTC should rise in difficult times: that is Satoshi Nakamoto’s original intention,” says Ju. But it is not just a matter of wishes. It is that bitcoin has characteristics that clearly differentiate it from the traditional financial market and put it closer to being a “digital gold.” One of the most significant is its planned shortageUnlike fiat currencies, which can be issued without limit by central banks, bitcoin has a fixed maximum supply of 21 million units. This limit is hard-coded into its protocol, ensuring that this amount will never be exceeded. This scarcity is comparable to (and even greater than) that of gold, a seemingly limited natural resource that has been used as a store of value throughout history. Like gold, which becomes more difficult and expensive to mine over time, the issuance of new bitcoin is predictably slowed down by a process known as halving. Roughly every four years, the reward given to miners for adding a new block to the chain is halved, slowing the rate at which new BTC is created and reinforcing its scarcity.
Bitcoin block rewards mined after each halving. Source: CME. In addition to its scarcity, bitcoin is also appreciated for its decentralization. It is not controlled by any government or corporate entity, but rather operates on a decentralized network of nodes. This decentralization protects Bitcoin from censorship and arbitrary decisions that can affect fiat currencies (and even other cryptocurrencies with a low level of decentralization). By being globally distributed, Bitcoin becomes resistant to restrictions imposed by any particular jurisdiction. Another important feature of Bitcoin is its immutability. Transactions recorded on the network are impossible to alter once confirmed, providing a high degree of security and trust. This is in contrast to the fiat system and other cryptocurrencies (e.g. Ethereum), where transactions can be reversed or modified under certain circumstances. The features mentioned here make it clear that BTC is something different from a Coca Cola (KO) or Tesla (TSLA) share, for example. It is something that has nothing to do with the traditional stock market, but is truly a financial revolution. When this starts to gain relevance among investors, Bitcoin will finally break away from traditional stock indices and soar higher in the marketsgradually leaving behind the influence of factors inherent to the «fiat world.»
