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Mid-Term Bitcoin Outlook Remains Murky

Mid-Term Bitcoin Outlook Remains Murky

True to form, bitcoin has been on an incredible rollercoaster in the current year, hitting dizzying heights, followed by sickening lows, before staging a half-hearted rally that left many wondering what’s in store for the leading cryptocurrency. 

Back in mid-April, bitcoin hit an all-time high of $65,000 before tanking wildly and losing more than 50% of its value in a matter of weeks. Since then, bitcoin price has staged a rebound, reaching as high as $42,435 a few days ago but appears unable to break heavy resistance around $43,000.

Nevertheless, diehard bitcoin bulls have been holding on tight and hoping for another mega-rally, no doubt encouraged by the last one that saw the leading cryptocurrency breach its previous all-time high of $20K.

Indeed, a cross-section of bitcoin investors believes that the crypto is set for an even bigger rally that will lift the entire crypto universe.

Bitcoin to $700,000?

To wit, Pantera Capital founder Dan Morehead has told Yahoo Finance that bitcoin could still see massive long-term gains as the cryptocurrency achieves mainstream adoption. Morehead says the number of people using bitcoin and bitcoin prices have been moving up in tandem by ‘an order of magnitude’ every two years and that bitcoin is likely to hit $700,000 in a decade when everybody with a smartphone starts using it.

With bitcoin currently changing hands at just above $38K on Tuesday trading session, that calls for a 1,800% rally.

Morehead points to increasing institutional acceptance as a major reason why bitcoin’s prospects remain bright.

Over the past year, bitcoin has been enjoying growing acceptance by Wall Street and some of the world’s biggest and most recognizable institutions and companies including Visa Inc. (NYSE:V), Square Inc. (NYSE:SQ), PayPal Holdings (NASDAQ:PYPL) and Tesla Inc.(NASDAQ:TSLA). The public listing of the biggest cryptocurrency exchange, Coinbase Inc. (NASDAQ:COIN), in mid-April helped to lend further legitimacy to cryptocurrencies as a mainstream financial instrument.

But the real icing on the cake would be if an online commerce heavyweight like Amazon Inc.(NASDAQ:AMZN) started accepting bitcoin as payment on its platform. Unfortunately, the ecommerce giant has just debunked those rumors and sent bitcoin tumbling below $40K, again.

In the near-term, Celsius CEO Alex Mashinsky has told Yahoo Finance that bitcoin can still hit $140-160K in the current year. Mashinsky says bitcoin price could soar if it's able to overcome a key resistance zone in $40-45K.

Regulatory headwinds

Unfortunately, massive regulatory headwinds have effectively wiped out the warm glow of institutional acceptance that had helped fuel the mad bitcoin rally.

Bitcoin has crashed spectacularly since May, losing nearly 50% in the space of two months in one of its biggest corrections by the cryptocurrency in recent years.

The market crashed in mid-May after Beijing started cracking down on the space,  curbing bitcoin mining due to concerns of excess speculation and warning financial institutions against offering crypto services.

Things quickly went to the dogs after the Department of Justice seized $2.3 million in bitcoin in early June as part of its investigation into a ransomware attack that shut down the Colonial Pipeline’s gas pipeline, the nation’s largest. The DoJ seizure helped fuel concerns that U.S. officials could ramp up their crypto oversight and threw a monkey wrench into one of bitcoin’s supposed forté--non-traceability.

The DOJ revealed that it seized 63.7 bitcoins, worth approximately $2.3 million, from online hacking ring DarkSide by reviewing bitcoin’s public ledger, locating the transaction and using a private key to access the tokens. It remains unclear what methods the DOJ employed to obtain the private key, but experts have suggested that Fed officials effectively hacked the hackers in an unprecedented show of government intervention in the crypto space.

More government intervention

The mid-term bitcoin outlook remains quite murky, with more government intervention already anticipated.

A couple of senate members on the Intelligence Committee have proposed to increase measures to regulate and trace cryptocurrencies.

 “The only way you can begin to get on top of the pervasive ransomware problem is to develop a pattern,” Sen. Roy Blunt (R-Mo.) told NBC News’ Meet the Press, noting that cryptos like bitcoin are the “ransom payment of choice” for hackers.

Experts in the past have warned that heightened regulation could easily stunt the crypto markets, and the past few months have clearly proven that. 

We concur with the experts, and believe the crypto markets could remain in the doldrums until the industry is able to free itself from government overreach.

And even then, bitcoin will somehow have to become much less volatile if it hopes to be taken as a serious store of value. Indeed, recent studies suggest that bitcoin has been gradually turning into a preferred safe haven over gold especially with millennials, yet the latest bout of extreme volatility makes it really hard for bitcoin to truly usurp gold’s time-honored role.

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