An Abrupt End
Looking back over the past couple of years, it’s clear that Bitcoin and the entire Crypto market have had a good run. Since early 2020 the Crypto market cap has been growing, while simultaneously gaining recognition due to its increasing size. Once a market moves into the trillions, it becomes rather difficult to simply ignore. With all the attention and constantly creating new highs, Bitcoin seemed to be on an unstoppable ascent. However, we all know that at some point it does come to an end. At some point, it runs out of steam, usually after giving one final blast. I think that most of us will agree that this time around it definitely was not the case. The bull market seemed to come to a rather strange and abrupt end.
Do You Remember 2017?
It is interesting to note that China always hands out a death blow in the heart of a Bitcoin bull cycle. Do you really think that this is a mere coincidence? That China just happens to make negative decisions regarding Bitcoin when Bitcoin is at its most powerful. The blow in 2017 did hit the market quite hard but its damage to price action was by no means impressive. Bitcoin managed to bounce back within no time, almost defying China, as it went on to shatter previous highs. Looking back on the cycle of 2017, it is quite evident that the China ordeal simply appears like any of the other corrections that took place during that period.
This was a surprise to all of us at the time, perhaps even China? By this time mainstream media was painting a picture of a truly unstoppable asset. I remember all the news stories that came out, especially as BTC went on to reach new milestones and defy the haters who were so outspoken.
China Hits Harder
A Crypto ban was obviously not enough to put Bitcoin down but what if the country that held 70% of the hash rate banned Crypto mining altogether? This is the strategic blow that China went with in 2021, collapsing the hash rate, as miners in China shut down. Obviously, some were able to relocate, while others were unable to finance relocation and other costs. The price of Bitcoin continued lower until eventually bottoming out at $29K. It was at this point that BTC initiated a strong comeback that went on to break the previous all-time high, attained in April.
China was able to send Bitcoin on a detour, subsequently causing BTC to fall victim to something a lot more damaging than a temporary setback. In order for me to bring this dynamic across, I will have to draw some similarities between a journey and a Bitcoin cycle.
The Journey & The Tank
Heading out on a long road trip will require that you fill up your gas tank, especially if there is a long stretch void of filling stations. You will factor in slight detours, where you will take a breather and possibly something to eat. Imagine now that you were forced for whatever reason to turn back and travel a significant distance before resuming in the direction of your destination. Do you think you will still reach your destination? No, you won’t, you will run out of gas first.
A Similar Journey
In a similar fashion, the halving and bullish sentiment act as the fuel for Bitcoin. The fuel to carry it to the projected price destination. The occasional mild detours are where Bitcoin experiences healthy retracements along the journey of the bull cycle. China banning mining is the equivalent of Bitcoin being sent back along its path before being able to resume its journey. In a similar way, Bitcoin used up its fuel on a forced detour.
The last of the bullish fuel was used traveling back to where it was initially detoured by China. Now you need to consider what would have transpired had that fuel been utilized to travel further from $65k!
China Effectively Robs Bitcoin
In essence, what has transpired through the China ordeal is actually quite devious. China has effectively robbed Bitcoin of approximately 6 months of bullish price action. Forcing BTC to squander its bullish fuel on an unnecessary and unplanned detour. We can argue whether this move was deliberate or not, it really doesn’t matter. At the end of the day, the result is the same regardless of intent. I know a lot of people believe that it is merely a case of diminishing returns and so on. I will agree that diminishing returns is an obvious expectation but I firmly believe that had this ban not taken place, BTC would have reached much higher levels.
As I am writing, Bitcoin is slowly edging higher after falling to the $33K mark. So what happens now? Where to from here?
A Filling Station
Bitcoin is currently facing a fuel crisis. In order for BTC to move upward from here with definitive and convincing price action, new fuel is required. Looking back to the previous bear market, there was a lot of development taking place. DeFi was birthed in this period and combined with the halving and other developments, we had the fuel to move higher. I am not exactly sure what it will require but I am fairly certain that Bitcoin will require some type of breakthrough.
Perhaps in the form of regulatory clarity, combined with more countries adopting BTC as legal tender. Perhaps it is something completely unknown at this point and still to arrive. There are actually quite a few scenarios that could play out from here for Bitcoin. Some are widely discussed, while there are others that I have not heard being explored yet that I believe could be a possibility.
At this point, one can only remain watchful in waiting for BTC to offer some indication as to what is next. As previously mentioned in my writings, Bitcoin does seem to love having the upper hand in the form of being unpredictable. Stay vigilant and see you in the next edition!