At the moment, no one can deny that Bitcoin has started a new bull market. The 500% rally and the new record high in 2020 is all the proof that is needed. But that doesn’t mean corrections won’t be coming any time soon, and according to VanEck’s Digital Asset Director Gabor Gurbacs, even a + 50% price drop will ultimately be extremely healthy for the very first cryptocurrency. This is why.
Bitcoin Bull Market gains momentum as capital flows in from institutions
Bitcoin is now bullish than in previous cycles, and while that’s surprising to even the most stalwart of crypto supporters, no one could have predicted the perfect storm 2020 has been for emerging technology.
Bitcoin is on track to take up the entire capital of the world and was set up for most of 2020 stealing the shine of goldpreventing the precious metal from regaining its peak from earlier in the year.
Hedge funds, institutions and the wealthy are looking to Bitcoin over gold to protect their wealth and retail value from the fiat currency’s coming collapse.
The market capitalization of the asset is now much larger than most companies that sell it, the companies that store it as part of their treasury reserves, and could absorb a significant portion of the market capitalization of more than $ 10 trillion of gold.
The new wave of wealthy investors has caused FOMO of financiers with deep pockets. The question and the crazy flight away from the dying dollar has resulted in the cryptocurrency taking off much faster this time compared to the previous cycle.
But even Bitcoin has to correct at some point, and if it does, one of the cryptocurrency’s hallmarks – as much as 50% or more – can follow crashes.
If and when this happens, Gabor Gurbacs, VanEck’s digital asset strategist and director, believes that this is ultimately a great thing for the cryptocurrency, and will make the next markup even stronger.
The next 50% + price drop will shake weak hands and bring in the strongest hands we’ve ever seen.
– Gabor Gurbacs (@gaborgurbacs) December 18, 2020
According to Gurbacs, the 50% correction will shake out the weakest hands and replace them with the strongest hands the crypto industry has ever seen. And since Bitcoin is so overheated and before the last bull cycle, such a drop is entirely possible.
A 50% correction would be in line with past bull markets considering Bitcoin is ahead of schedule | Source: BTCUSD on TradingView.com
Shakeout will move BTC from weak hands to ‘strongest hands’ ever
Private crypto investors often Buy FOMO and then panic selling several times a year. While institutions often take positions for the long term, which can last five, ten or twenty years.
Drawdowns don’t panic on smart money, which in the worst case would result in a significant loss to their speculative bet in BTC. Because they are well diversified, and allocate only a portion of their enormous capital, there is little reason to even look at a total loss scenario.
This also makes their buy-in price regardless of current levels given their position sizes and targets over five to 10 years when Bitcoin could be worth millions per year. mint.
The need for low prices is negligible for investors of this size, but even they are calculated risk takers and are more likely to cryptocurrency is finally correcting.
This could lead to crashes being bought up extremely quickly by hands that are less likely to sell in the near future, meaning the next momentum will be stronger for them.
Featured image from Deposit Photos, Charts from TradingView.com