Why the Bitcoin Price Bottom Could Come After ‘Final Washout’
After a wild year in crypto, the bitcoin price bottom appears imminent. But how much longer do bulls have to wait? Are more lows coming? Will it be a final washout or the end of the bear market? In this final post of our three-part series on what’s ahead for bitcoin and its rivals, we explore why a positive long-term outlook remains despite the recent carnage. A final washout would mark an extreme point of fear, pain and capitulation among market participants – a time when almost everyone has given up on cryptos. It may never happen, but even so, there are reasons why bitcoin is probably nearing its ultimate low.
Why the Bitcoin price bottom could come after a final washout
One way to read the current market is to assume that the worst is already behind us. That a final washout has already happened. If that’s the case, then bitcoin may already be nearing its ultimate bottom. A few things support this reading of the data. First, the final washout is likely to be a global phenomenon, which means that its full force has already been felt in all major markets. Anecdotally, this appears to be the case. Outside of a few outliers, the sentiment surrounding bitcoin and the broader market is one of extreme pessimism. Second, the sheer magnitude of the current downtrend suggests that the final washout has already occurred. The bitcoin price is down 88% from its all-time high, with many altcoins losing more than 99% of their value. It’s almost impossible to drop that much in just a few months without hitting rock bottom.
The final washout will signal a definitive end to the bear market
The bitcoin price bottom is usually described as the point when the market finally shakes off its bearishness and turns bullish. But while high hopes and optimism might lift the spirits of investors, they don’t really have an impact on the price. It’s the final washout that matters. Because it doesn’t just signal a bottoming of the bitcoin price, it also signals an ending of the bear market. It’s the point when everyone gets so sick of watching their crypto lose value that they finally capitulate. When the final washout occurs, it doesn’t matter if investors are bullish or bearish. What matters is that almost everyone has given up on the prospect of a quick rebound and decided to cut their losses. The market has hit rock bottom and is likely to start rising again (at least in the medium-term).
The path to the Bitcoin price bottom will be paved by regulation
As we’ve explored in previous articles, the real catalyst that will drive the bitcoin price to new highs is the entrance of institutional investors. And while there is no guarantee that they will ever actually come, the recent decline in crypto prices has undeniably made the crypto space more attractive to institutional investors. Because the decline has led to depressed valuations and a lack of liquidity, institutions now have an opportunity to get in on the market without driving the price up. Many are now struggling to find the right entry point and are looking to regulatory clarity as the solution. The SEC and other regulatory bodies are slowly working through the backlog of bitcoin ETF applications. As these bodies work through the backlog, we can expect to see more positive reviews and a general rise in the level of institutional investment in the bitcoin market. This will in turn create the momentum and liquidity needed to shift the current downtrend into a new uptrend.
Bitcoin fundamentals are only getting stronger
Ultimately, the bitcoin price bottom is not a reflection of current sentiment but a projection of future expectations. When the bottom comes, investors will start to bet on the future prospects of bitcoin rather than its current performance. And while bitcoin’s current performance has been dismal at best, the fundamentals behind the crypto have never been stronger. First, the bitcoin network is now processing more transactions than ever before and continues to grow at an exponential rate. This points to a growing utility of bitcoin as a daily payment method, which should bolster its value over time. Second, the value of bitcoin is tied to its supply. As the market capitalization of bitcoin rises, so will its price. If you believe that the overall supply of bitcoin will remain constant, then the only way for its price to rise is for the price per unit to rise. Third, the bitcoin blockchain is now recognized as one of the most valuable and secure networks on the planet. This makes it an increasingly attractive store of value, which in turn will lead to higher demand and prices.
The bitcoin price bottom is a widely debated topic and one that will probably become even more common as the bear market continues. But whether the bottom is behind us or still has a ways to go, it’s important to remember that the bitcoin price is not a reflection of sentiment. It’s a projection of future expectations. The bottom will come when investors have put their hopes behind a future price increase and have stopped caring about the current price. It will come when investors are focused on future adoption and regulatory progress rather than on short-term price movements. That might happen after a final washout or it might not. But regardless of when it comes, its arrival will signify the end of the bear market and the beginning of a new bull run.