Bitcoin: How Long Will The Current Correction Last?

Bitcoin buyers who were counting on the continuation of the "bullish" rally and expected the BTC/USD pair to hold above the psychological resistance of $20,000 had to face a major disappointment this week. Instead of rising, Bitcoin developed a downward correction and fell to the area of $18,000. However, despite the local sell-off, most experts agree that the current weakness is a temporary phenomenon and bulls have good chances to regain the initiative at any time.

Bloomberg analysts believe that Bitcoin may fluctuate somewhere within a wide $10,000-50,000 range. It is also expected that unprecedented quantitative easing, as well as a gradual decrease in the emission of new coins, may push the BTC to new all-time highs. At the same time, the current consolidation in the $20,000 area may take several months. Market participants are optimistic about the BTC/USD future uptrend. They expect the BTC to keep its upward momentum in the long term based on fundamental shifts compared to the situation in 2017.

First of all, it’s worth noting that the infrastructure as well as the regulatory framework that has been created, have made cryptocurrency accessible to institutional investors. During the 2017 rally, none of this had been achieved. But things are different now. The regulatory environment has become much more transparent. Regional and federal authorities in the United States, including the Internal Revenue Service and the Securities and Exchange Commission, have introduced rules for dealing with digital currencies. This allowed companies such as CME Group (NASDAQ:CME), Intercontinental Exchange (NYSE:ICE) and Fidelity Investments to offer crypto purchase and sale services.

Over the past three years, open interest in Bitcoin futures on CME has reached $1 billion, while Bitcoin daily emission has decreased from 1,800 to 900 coins, and the volume of Grayscale Bitcoin Trust (“GBTC” has skyrocketed from $200 million to $10 billion. Among other growth factors is the decrease in BTC volatility. The volatility index for 6 months is only 1.8 times higher than that of gold. In other words, Bitcoin is gradually getting rid of the main reason for distrust on the part of large investors, namely its hyper volatility.

Thus, the potential growth of BTC’s market capitalization to $1 trillion, is just a matter of time. This may well happen in 2021-2022. Currently, Bitcoin’s total capitalization doesn’t exceed $340 billion. The decision of the US Congress to print another $1 trillion to back the country’s economy during the coronavirus crisis may act as a new catalyst for growth in digital currencies. Such a significant increase in the money supply will be more than enough for inflationary risks to return to the market. Thanks to its deflationary nature, safe-haven Bitcoin will definitely profit from it.