But the remarkable rally to over $ 46,000 has left cryptocurrency analysts divided over which direction bitcoin will take from here, with two polarizing theories putting it either on course to new all-time highs before the end of the year. 2021, on the verge of imminent collapse. .
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Both theories draw on patterns from previous market cycles, including the record bull runs and subsequent bear markets of 2013/14 and 2017/18.
The first, more optimistic forecast claims that bitcoin has just entered the second stage of a two-year bull run that will see its price move “to the moon” and eclipse the high of $ 64,000 it has. known in mid-April.
The second theory postulates that the current price spike is a bull trap pattern known as the dead cat bounce, which will see bitcoin drop much lower than the $ 29,000 it hit towards the end of July.
Two of the most prominent advocates of each opposing theory are two pseudonymous analysts called PlanB and CryptoWhale, who have almost a million combined followers on Twitter. The two have made their voices heard throughout Bitcoin’s latest rally, pointing to it as evidence to support their competing ideas.
For Dutch analyst PlanB, bitcoin follows a price model that he published with great success in 2019. The Stock-to-Flow (S2F) model is based on the inherent scarcity of bitcoin – only 21 million bitcoins will never exist – and has proven surprisingly accurate until now.
With bitcoin mining rewards halved roughly every four years through a process built into its network known as ‘halving,’ the S2F model is gradually plotting increasing boom and bust cycles. most important for cryptocurrency.
Different variations of it place the peak of this current cycle between $ 100,000 and $ 500,000.
In contrast, CryptoWhale subscribes to the theory that this may be the last chance for crypto investors to make a profit before a sustained bear market pushes bitcoin down to $ 7,000.
“After my dozens of warning tweets and articles about a bull trap / dead cat bounce at around $ 30,000, we finally saw it,” he tweeted on Tuesday, as bitcoin peaked at three months.
This bottom level seems extreme, even by Bitcoin’s standards. The previous form suggests a lower bound for this cycle of around $ 20,000 to $ 30,000, as at no time has it fallen below the all-time high seen in the previous bull run to the one it just experienced. .
This means that anyone who bought and held bitcoin for a period of four years at any point in bitcoin’s history made a profit at the end of it.
Bitcoin’s wild volatility stems from a multitude of factors, making any future price prediction nearly impossible to make. It’s fragile enough that an Elon Musk tweet could seemingly crash or rise in an instant, while longer-term trajectories can be determined by new regulations and laws everywhere from the United States to China. .
The trillion-dollar infrastructure bill that passed in the Senate on Tuesday, for example, could potentially hurt the industry and therefore the price because of the new crypto tax reporting requirements. On the contrary, analysts have noted that the frequent mention of bitcoin by prominent members of the Senate, such as Ted Cruz, has helped increase awareness of the cryptocurrency and therefore may ultimately lead to its adoption and further news. price increases.
“Bitcoin is leading the charge as mass crypto awareness emerges on the verge of reaching critical mass,” said Paolo Ardoino, chief technology officer of the Bitfinex cryptocurrency exchange. The independent.
“Significant buying pressure is coming from institutional investors who now realize that the king of crypto has become too important to ignore. Meanwhile, we see a united front in the industry as we come together to protect what has been built over many years amid continued debate in the United States Senate. “