Bitcoin: A Journey Through Volatility
Launched almost 12 years ago, Bitcoin (BTC) has become synonymous with market highs and lows that would make a rollercoaster feel like a kiddie ride. While some believe Bitcoin’s role as a store of value lends stability to these cycles, Rob Viglione, the co-founder and CEO of Horizen, sees it quite differently.
Diving Into Uncertainty
Viglione shared his thoughts with Cointelegraph, stating, “The only consistent thing about Bitcoin and crypto markets is a large degree of uncertainty.” The cryptocurrency space is witnessing the birth of a new monetary system and a peer-to-peer economy – messy business indeed!
Decentralization: Freedom or Chaos?
Bitcoin’s charm lies in its decentralization and borderless nature, which allows instantaneous, pseudonymous transactions. With a finite maximum supply coded into its DNA, Bitcoin’s new issuance decreases every four years, creating a unique economic cycle. But, while the math seems sound, uncertainty looms over demand, stirring the pot of volatility.
Understanding Supply and Demand Dynamics
Analyst PlanB has crafted a stock-to-flow model predicting Bitcoin’s future prices based on these supply halving events. While this gives some logical consistency to Bitcoin’s market cycles, human behavior throws a wrench into the works. Viglione illustrates this well: “Sure, the Bitcoin money supply path is entirely prescribed from its genesis, but the demand side is entirely uncertain and swings wildly.”
The Human Touch: Not Always Rational
Kosala Hemachandra, CEO of MyEtherWallet, backs Viglione’s viewpoint on the inconsistency of Bitcoin’s cycles. He notes our human nature, saying, “We tend to see patterns especially in trading.” This tendency, which he labels apophenia, can lead us to misinterpret trading signals.
Watching the Price: Supply and Demand in Action
Hemachandra digs deeper into this dynamic: “It is always reasonable to assume that there will be a rise in the price if the supply of the asset goes down, simply because the demand remains constant while the supply halves.” Factors like technological advances and market popularity can also drive bull cycles in Bitcoin and other assets.
The Headlines Keep Coming
Speaking of popularity, Bitcoin has recently been in the headlines, trading close to its all-time high. So, whether you’re a seasoned investor or a curious onlooker, strap in – the crypto rollercoaster shows no signs of slowing down!
