Dan Held says bitcoin can reach $1 million.
Bitcoin is the middle of a market cycle.
Right now, it’s bullish.
Similar to bull runs in both 2013 and 2017, bitcoin has reacted in ways that some analysts predicted. This market cycle, however, is different.
Bitcoin, like the rest of the financial markets, was pushed to the brinks in March 2020. The world’s largest cryptocurrency plunged below $4,000 on some exchanges in the second week of March.
It was a stress test unlike any previous cycle.
Bitcoin survived the stress test.
The test included a liquidity crisis, forcing exchanges to react to panicked sellers. No matter the chaos of that 24 to 48 hours, bitcoin did not go to zero. It did not die.
In fact, it did the opposite.
Since March 2020 lows, bitcoin continues to hit new all time highs and sustain higher lows.
COVID provides a unique backdrop to what Dan Held describes as a “supercycle.” Held is currently at Kraken but he’s also a longtime bitcoiner and prominent voice in the crypto space.
Held discusses how the built in protocol of halving the bitcoin block reward every four years influences market cycles.
Bitcoin’s market cycle is typically around 4 years and some hypothesize the cycle is induced by halvings (a reduction in new supply). The idea being a reduction in supply + increase in demand = number go up. We can call this Bitcoin’s viral marketing loop. Satoshi describes it succinctly:
“As the number of users grows, the value per coin increases. It has the potential for a positive feedback loop; as users increase, the value goes up, which could attract more users to take advantage of the increasing value.” — Satoshi Nakamoto
2020 witnessed the third bitcoin halving.
Halvings cut the amount of bitcoin that miners for their efforts in half. Miners process transactions and secure the bitcoin network.
Bitcoin cycles can be tracked alongside halvings. The first halving was in 2012 and the second was in 2016.
Both of these halvings were the start of the first two major bull runs. 2012–2013 was unique in that it was truly bitcoin in original price discovery mode. There was, however, a distinct bull run then.
Standard Cycle + COVID + QE
2020 had all the standard pieces of a bitcoin market cycle. There was a mid-year halving coming. That brings more interested buyers, curious about the supply becoming more limited.
There was a far greater number people in bitcoin since the last market cycle. Bitcoin never died, as it never has.
That means that there are more users, increasing the quality of bitcoin as money or a store of value asset. It’s more desirable and universally sought after, with four more years on reinforcement.
Beyond just a larger number of bitcoiners, a larger percentage of that number was also more established or institutional money.
Then came COVID and unprecedented money printing.
Quantitative easing the likes we had never seen before became commonplace in the United States and across the globe.
COVID was the tipping point.
It tested bitcoin as we mentioned above and bitcoin passed the test. Bitcoin would continue on about its standard market cycle with the X factor variable that COVID brought to the equation.
Thus, the supercycle.
Bitcoin was made for this moment. — Dan Held
A growing number of bitcoiners and financial analysts or institutional investors are calling for high bitcoin price targets.
Max Keiser is calling for $220,000 in late 2020.
PlanB’s stock to flow model has bitcoin hitting $288,000.
JPMorgan has changed its tune and is calling for $146,000, referring to bitcoin as a gold competitor. That gold narrative is key.
Dan Held notes that the gold narrative is the one that has stuck amongst institutional buyers. It’s a narrative that people can understand.
The Winklevoss twins have made the case for a $500,000 bitcoin, basing much of their research on the impact of the gold 2.0 narrative.
Cycles Include Bear Trends
A normal bitcoin market cycle would include a top, followed by a significant pullback. This time could be different.
If we stick to historical market cycles, we are about half way through the number of blocks in a full cycle.
That means we are not necessarily at the top, but could see a parabolic push toward a much higher top like the predictions above.
That top is typically followed by a pullback.
What if the Pullback Is Different This Time?
The uniqueness of this market cycle cannot be ignored.
There’s zero guarantee that bitcoin sees a volatile rise to $1 million and beyond. But it’s difficult to see bitcoin pulling back in ways that it has in the past. This is largely due to a mainstreaming of bitcoin as a store of value.
Bitcoin is proving to be a competitor to gold.
The more bitcoin survives, the greater number of users it gains. The greater the number of users, the larger the market cap.
And these are just the ones we’re aware of.
The pullback will not be the same this time around.
Bitcoin may not rocket to $1 million, but the floor for a pullback is undoubtedly higher.
The 2017–2018 cycle was marred by the fallout of the ICO craze. This was its own unique stress test that took nearly up until the recent cycle to recover from.
Money is smarter this time around.
Bitcoin is being stored away in wallets and not moving.
Institutions are not day-trading bitcoin or looking to get rich quick off of initial coin offerings. They are buying large amounts of bitcoin as a hedge against the dollar to protect their treasury reserves.
So, are we heating up for a bitcoin market supercycle?
Unfortunately, I don’t have the answer.
Neither does Dan held.
Time will tell and we’ll know sooner rather than later if this market cycle will be different from previous ones.
There is writing on the wall and it’s compelling. Will the predictions come to fruition? Can bitcoin continue on a parabolic rise?
Let me know what you think.