Bitcoin is known for its volatility, and its price often fluctuates. Although it quickly recovered from the plummet caused by the pandemic in March 2020 and continues to hit all-time highs, this does not mean that Bitcoin will not have similar events in the future. Jason Brown, the business development director of Komodo, a smart chain platform, recently expressed his views on what might cause Bitcoin (BTC) to experience another coronavirus-like price drop.
Brown told Cointelegraph: “I think that given the current upward trend in institutional adoption, this situation is unlikely to happen. On the other hand, we cannot foresee that the coronavirus will cause such a sudden collapse and short-term bear market, and then from 2020. The bull market started in summer.”
In March 2020, Bitcoin plummeted by 50% within 48 hours, and other traditional markets also experienced similar declines. Since then, many mainstream giants, such as MicroStrategy and MassMutual, have announced a large number of Bitcoin USD allocations. MicroStrategy, especially under the leadership of its CEO Michael Saylor, has become a strong supporter of Bitcoin, partly to combat inflation. Brown said: “The organization clearly has a long-term HODL mentality, not speculation.”
However, when people or companies need to spend money to maintain operations, the plan may change. Brown explained: “The potential challenge is what will happen if the institution itself fails, even if it is related to factors outside the current crypto market.”
Given that the recent price of Bitcoin has exceeded $41,000, buying now means buying at historical highs. Brown explained that large companies are buying cryptocurrencies at higher than average prices. Brown said: “This means that if the price of cryptocurrency falls or stagnates, we may see an institution fall into a financial crisis, so they decide to sell at a price lower than the market average.”
“Although this situation is very theoretical, it is unlikely to happen, but it may cause a chain reaction in the opposite direction and send us back to the bear market. We have talked about how whales (high net worth individuals) affect Market, but now the total supply of Bitcoin is even more concentrated. In the future, what may happen is a real large-scale sell-off by a major institution, which will have a significant impact on the market, even greater than the impact of the bear market that began in 2018 .”
In the 2018 bear market, the price of Bitcoin fell from $17,000 to below $4,000.
