Bitcoin (BTC) faces a myriad of real-world obstacles on its journey to the next bull run.
As the world’s largest cryptocurrency struggles to regain the heights it reached in 2021, experts argue that Bitcoin needs to address several challenges before expecting a major rally.
One immediate hurdle for Bitcoin is its macroeconomic predicament.
In a rising interest rate environment, investors tend to move towards risk-free assets that provide reliable yields.
Comparatively, Bitcoin lacks the intrinsic value and cash flow generation potential to compete with Treasury bills or cash, Sam Lee from SVRN Asset Management told Axios in a recent interview.
“You can own T-bills or just own cash and get a 5% yield,” Lee said, noting that this lowers the allure of Bitcoin.
Aside from macroeconomic headwinds, Bitcoin is also facing the need to prove its use case beyond being an investment vehicle.
Kurt Wuckert Jr., Chief Bitcoin Historian at CoinGeek, noted that Bitcoin is a highly disruptive technology but mentioned that the majority of people are primarily interested in holding the asset and hoping for its price appreciation instead of actively utilizing it.
Lee also echoed this point of view, likening Bitcoin and Ethereum (ETH) to digital pet rocks, which shows the lack of emphasis on utilizing their functionality.
“You see the cynicism of Crypto Twitter,” Lee said, calling crypto “a giant speculative metagame.” People aren’t talking about how to use it or tap its functionality. “It’s — what’s the next narrative.”
Despite these challenges, Bitcoin’s market capitalization currently sits at around $513 billion, which is 500 times higher than its value a decade ago.
Furthermore, Bitcoin has also proven media proclamations regarding its demise wrong over the years, which marks a notable achievement.
Can Bitcoin’s Upcoming Halvening Event in 2024 Trigger a Bull Market?
There is a bullish argument for Bitcoin’s upcoming halvening event in April 2024.
This event, which reduces the rewards earned by Bitcoin miners, has historically preceded market rallies, according to Wuckert.
However, there are factors that differentiate the current halvening event from its predecessors.
Previous halvenings occurred during periods of loose monetary policy, whereas the present economic landscape might not share the same characteristics.
It is also important to consider the time horizon when evaluating investment opportunities.
The current state of the cryptocurrency market suggests that there is considerably less money flowing into crypto, potentially hindering any immediate price surge, according to Lee.
He mentioned that stablecoins, the dollar-pegged cryptocurrencies used as a bridge to enter more volatile trading, are experiencing a reduction in market capitalization.
This indicates a draining of money from the cryptocurrency ecosystem, further narrowing the inflow of funds.
At the time of writing, the leading cryptocurrency is trading at $26,046, almost flat over the past day.
However, Bitcoin is down by more than 62% compared to its all-time high of $69,000 registered in November 2021. The cryptocurrency is also down by 11% over the past month.