Written by 5:48 pm Bitcoin

Bear Markets Differentiate Those Who Understand The Long-Term Value of Bitcoin

By Gabriel Kurman, Co-Founder of RSK Labs

Cryptocurrencies have taken a massive hit this year, losing more than a trillion dollars in market capitalization since the most recent rally of 2021.

Bitcoin (BTC), the leading cryptocurrency by market capitalization, is off 70% from its November all-time high of nearly $69,000. In turn, Bitcoin’s sideways movement and dominance over the broader crypto market has triggered a domino effect, bringing the panoply of altcoins down with it.

Despite the lackluster performance over the past six months, BTC is still more than twice as valuable as it was during the previous crypto winter. Yes, bitcoin has seen better days, but the ongoing wave of new projects on the Bitcoin network is laying the foundation for an epic bull run in the coming months.

Experts Bet Big On BTC

A recent study by Deutsche Bank revealed that nearly 25% of Bitcoin users believe its value will surpass $100,000 in the next five years. Also, Bloomberg Intelligence’s senior commodity strategist Mike McGlone predicted that BTC will hit $100,000 by 2025. He further emphasized that once the bear market ends, BTC is well-positioned to roar higher and become the “most valuable” asset in the world.

This makes sense if we consider Bitcoin’s overall performance over the years. Bitcoin has an extensive record of accomplishments compared to the ever-growing range of altcoins. After a prolonged period of stagnation, Bitcoin broke past the $1,000 mark in 2017, kicking off a euphoric bullish phase.

By the end of 2017, the value of BTC had reached close to $20,000. However, the infamous “crypto winter” set in during this period, and by the end of 2019, Bitcoin’s value was hovering around $7,200.

This trend was followed by the breakout that corresponded with the COVID-19 pandemic – propelling the value of BTC was just short of $30,000 – the highest since its launch in 2009. Eventually, the seminal cryptocurrency doubled to reach its all-time high of $68,789.63 in November 2021.

The historical data shows that the value of BTC in the past two bull cycles has reached new all-time highs, effectively building a strong case for the next cycle and the predictions, especially after this latest downturn in prices.

In addition to the above, despite the ups and downs, Bitcoin adoption continues to set new benchmarks. In its recent Global Crypto Adoption Index report, Chainalysis noted that the global adoption of Bitcoin had skyrocketed by nearly 880% in one year between July 2020 and June 2021. And at the rate at which Bitcoin is cementing its position across emerging markets, it is quite certain that Bitcoin adoption will continue to grow in 2022 and the years ahead.

Every bear market creates new opportunities and filters out the “weak hands” that are here for short-term gains. Compared to the multitude of altcoins, most of the institutional investment across the Bitcoin landscape has been rather consistent since 2017. Some of the biggest names in the industry, such as MicroStrategy, Core Scientific, Square, Galaxy Digital, Blackrock, Grayscale, and many others are periodically stockpiling BTC, which is a clear indication that institutional players are betting big on Bitcoin’s long-term viability.

A Massive Rise In “Shrimp” Wallets

While the ongoing bearish pressure has led to a decline in institutional interest and triggered a string of liquidations (like Tesla’s most recent decision to dump 75% of its BTC holding), it has supported a more widespread entrance of retail investors. During the last rally, retail investors faced difficulties investing in BTC due to its soaring prices. However, the sideways price movement since the beginning of 2022 has invited retail investors (and newcomers) to buy in.

Per data from on-chain data aggregator Glassnode, “BTC accumulation by shrimp accounts (wallets that hold less than 1 BTC) has increased substantially in the last few months. Initially triggered by the Terra implosion, the accumulation now equates to roughly 156,000 BTC.”

Meanwhile, a growing number of crypto exchanges and platforms like AAX, OKCoin, Bitfinex, and Coinmarketcap, among others, have adopted the Satoshi (SATS) Standard.

With these platforms supporting the SATS/USDT trading pair, owning a piece of the “Bitcoin pie” has become easier than ever before.

Besides, using SATS to break BTC down into the smallest-possible units is also playing a key role in the expansion of using BTC for micropayments. As such, many stores, outlets, and brands have started accepting BTC payments, further accelerating the mainstream adoption.

Increased Adoption Across Emerging Markets

After El Salvador, the Central African Republic (CAR) has also adopted Bitcoin as a legal tender, thereby expanding its use and adoption. Cryptocurrency exchange AAX recently commissioned a survey via Forrester Consulting, which indicates that BTC adoption and awareness across emerging markets in Africa, Latin America, Southeast Asia, and the Middle East has grown considerably since 2021’s all-time high.

According to the report, users from Southeast Asia and the Middle East are increasingly using BTC as a means of money management – from using it as a source of savings for the future, generating profits, and using it as a hedge against potential losses. Most users across Africa and Latin America use BTC as the primary mode of sending and receiving payments.

As a result of this increased adoption, a wave of merchant stores and outlets have started accepting Bitcoin as payment, further expanding the legacy token’s use cases. Additionally, the increasing adoption and mainstream use have also accelerated regulatory developments.

Foraying Into The World Of Smart Contracts

Another critical reason Bitcoin is the prime contender for the next bull run is its continued expansion into the DeFi and NFT markets. In the previous cycles, the Bitcoin network was mainly limited to processing transactions, and BTC stuck to its narrative of a “store of value.”

However, a diverse range of scaling solutions, sidechains, and smart contract protocols purposefully built for the Bitcoin network have emerged in the last couple of years. Cumulatively, these solutions have unlocked new opportunities for the Bitcoin ecosystem and its native BTC token. These solutions support a wide range of decentralized applications and protocols to operate on the Bitcoin network using smart contracts while maintaining Bitcoin’s core ethos of security, immutability, and decentralization.

With the help of Bitcoin-based smart contract solutions and the Bitcoin-based payment solution Lightning Network, the Bitcoin system has now entered the flourishing world of DeFi and NFTs. The existing DeFi ecosystem has shortcomings, such as a lack of liquidity, decentralization, and security. Bitcoin-based DeFi applications address all these challenges by harnessing the power of Bitcoin’s core layer and the market dominance of BTC.

Bitcoin-based DeFi and NFT platforms have been around for years now. Yet, despite prevailing market conditions, the total value locked in Bitcoin-based DeFi projects has cumulatively crossed past $100 million, further underlining the demand for BTC.

Together, all the above points make a strong case for BTC moving forward. Although disheartening, crypto winters are among the proven ways to filter the broader market. It grants you a clearer picture of the projects and investors that are here for the long-term, not for speculation and short-term gains. Moreover, despite its ability to hamstring innovation in the short term, more widespread regulation will also heighten confidence amongst large and small investors, not to mention its encouragement for developers to join the ecosystem.

Personally, I expect the next bull run to be driven by bitcoin nation-level adoption across the globe with particular emphasis in emerging markets and massive adoption at an individual level across countries suffering from hyperinflation.

Amid all the collective developments like retail adoption, expanding use cases, increased payment activity, and efforts to improve accessibility, Bitcoin stands to gain significantly from this latest market shakeout while simultaneously cementing itself as the most trustworthy network in the cryptosphere.

About the author

Gabriel Kurman is the Co-Founder of RSK Labs. A regular speaker at international Blockchain conferences with more than 20 years of experience in corporate finance and private equity, Gabriel has been involved in the crypto space since 2013 when he co-founded multiple for-profit and non-for profit Blockchain projects. In addition to RSK Labs, Gabriel was also the co-founder and CEO of Koibanx, a Blockchain services firm for banks and governments. Prior to that, he worked for Advent International in both Argentina and the United Kingdom where he raised a $1.65 billion fund for LATAM and acquired the LKM Laboratory. Before this, he also worked at and Monsanto in Argentina and USA.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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