Expert considers such scenario highly unlikely and theoretical, but not impossible
Bitcoin is known for its high volatility:
In fact, it constantly fluctuates between gains and losses. Although it quickly recovered from the pandemic-related slump last March and reached new all-time highs, this does not mean that the asset might not face similar events in the future.
Jason Brown, director of business development at smart-chain platform Komodo, recently discussed what factors could cause another massive Bitcoin Union similar to the one in March.
Brown told Cointelegraph:
„I think such a scenario is unlikely, as the current trend is toward institutional adoption. On the other hand, we couldn’t foresee COVID causing such a sharp crash and bear market in the short term, followed by the subsequent bull market that began in the summer of 2020.“
In March 2020, the price of Bitcoin plunged 50% in 48 hours, while similar declines occurred in mainstream markets. Since then, several mainstream giants, such as MicroStrategy and MassMutual, have gone public with their purchases of the cryptocurrency. MicroStrategy, in particular, led by its CEO Michael Saylor, has become a major supporter of bitcoin, in part as a hedge against inflation. Brown clarified that „institutions clearly have a long-term HODL mentality and are not speculating.“
Plans may change, however, if people or companies need to spend capital to stay afloat:
„You have to consider what could happen if the same mainstream institutions fail, even if that’s related to factors outside the crypto market.“
With Bitcoin hovering around $40,000 these days, buying now means you’re buying at the highest prices ever. The big players buying significant amounts of crypto are doing so at higher-than-average price levels, according to Brown:
„This means that we could see a scenario where an institution faces a crisis due to falling or stagnant crypto prices and therefore decides to sell below the market average.
Although this is very theoretical and unlikely, this could cause a ripple effect in the opposite direction and send us back into a bear market. Earlier we talked about how whales (wealthy individuals) move the market, but now the overall supply of major cryptos is even more centralized.
Going forward, one big sell-off from a major institution could be enough to have a big impact on the market, even more than the bear market that started in 2018.“
In 2018, the bitcoin price fell from $17,000 to under $4,000 in a short period of time.