The Bitcoin rate continues to fall, and yet more and more people in the market say that a new period of growth is coming, and the bearish trend will soon be replaced by a bullish one. Is it time to buy Bitcoin, or has its time passed? We discussed this topic with cryptotrader Andrey Elinson.
Interviewer: Andrey, can you tell us what is happening to Bitcoin right now? When will its rate begin to rise?
Andrey Elinson: Well, we already see a change in trends. The Bitcoin rate passed its minimum a month ago. On November 21, its rate was 15,625 dollars. In December, it stayed above 16,500, and its peak values were close to 18,000. So we can very likely assume that it’s almost time for the bulls.
Interviewer: So you predict that in the short and medium term, Bitcoin will go up?
Andrey Elinson: Bitcoin will go up in the short term. And, even if the cryptocurrency loses in value for a short period of time, it will quickly recoup everything. Every day, we can see new players investing in cryptocurrency, which fuels its demand.
Interviewer: What do you believe to be the reason for that? The world economy is currently in recession, after all.
Andrey Elinson: Many investors understand that the supply of BTC is decreasing, and mining is becoming more and more difficult. At the same time, traditional currencies and shares of large companies are too exposed to geopolitical risks, which causes an increased demand for BTC. Accordingly, the rate of Bitcoin, subject to classical market laws, gradually begins to grow. Another reason for the rise in Bitcoin value is the recently published data on inflation in the U.S., which once again showed the unreliability of traditional investments via the U.S. dollar.
Interviewer: You talk mostly about the impact of the U.S. economy, but what about Asia? It’s no secret that Chinese investors are the key players in the crypto market.
Andrey Elinson: It’s true, Chinese crypto investors account for three-quarters of the global Bitcoin hash rate. And the fact that China’s economy remains feverish because of the COVID-19 pandemic forces more and more Chinese players to withdraw their assets into the crypto-industry, including Bitcoins. Despite the fact it’s been falling in recent months, crypto traders prefer digital currency as a way to preserve and multiply their assets, having faith in its eventual growth. Especially since, as I said earlier, Bitcoin production is constantly decreasing, and it will eventually become a scarce asset.
Interviewer: So it’s all about limited issuance, which fuels demand? Just like before?
Andrey Elinson: Limited issuance and systematic reduction of reward for a new block every four years play a significant role in Bitcoin pricing. The last halving took place in 2020, and the current reward is 6.25 BTC. The next halving in 2024 should reduce the reward per block to 3.125 BTC. That said, according to Buy Bitcoin Worldwide, as of November 2022, more than 91 % of the total BTC has been mined.
The halving pricing model explains the “high cyclicality” in the cryptocurrency market. Historically, a sharp rise in the price of Bitcoin is almost always accompanied by an equally extreme drop. We witnessed a similarly significant decline in 2022, and now we’re expecting to see a period of growth in 2023.
Inteviewer: So history is repeating itself?
Andrey Elinson: During 2013, BTC rose from $14 to $1,100. But starting from the second half of December, a bearish trend was established, and by January 2015, the value of Bitcoin reached about $180. A similar situation was observed during the 2017 crypto winter when the first crypto rose to $20,000 in December. Given that at the beginning of the year, the asset was worth about $960, it can be argued that the price has grown 20 times. But then, in December 2018, BTC was being traded for around $3,200. It can be assumed that in between halvings, the exchange rate tends to reach new historical highs, followed by prolonged corrections and crypto winters.
Interviewer: What do you think about alternative cryptocurrencies? The collapse of the Luna coin bankrupted a huge number of investors and scared many unprofessional players out of the market.
Andrey Elinson: Altcoins, including large ones like Luna, have always been a high-risk investment tool. In fact, there have barely been any cases of bankruptcy of professional crypto-investors after the fall of Luna. One of the main principles of their work is the distribution of assets. The fall of one or even several currencies is compensated by the growth of others. The main losses were suffered by non-professionals who made one single currency the basis of their portfolio.
Interviewer: So you recommend forgetting about the Luna story and investing in both Altcoins and Bitcoin?
Andrey Elinson: I recommend not putting all your eggs in one basket. Currently, the market has enough promising cryptocurrencies, so one’s investment crypto portfolio should be divided between them and the already familiar Bitcoin and Etherium. Litecoin, SHIB, and Tokocrypto exchange tokens, just to name a few. The main rule is to create the broadest possible portfolio in case one of the cryptos crashes. The whole market will never fall, and the fall of one coin will be compensated by the growth of others.
About Andrey Elinson:
Born May 18, 1985, in the city of Tolyatti.
2002 Graduated from high school with a silver medal;
2007 Graduated from MIPT (Department of Control and Applied Mathematics);
2009 Defended his thesis in Management and Economics at the same MIPT;
2011 Defended his thesis in Executive MBA Strategic Management in HEC (École des hautes études commerciales de Paris), one of the oldest business schools in Europe.