During the market downturn in March 2020, Bitcoin (BTC) fell by more than 50% in value over a two-day period. Traditional financial markets also fell sharply in March. Although Bitcoin has made a remarkable recovery, breaking the price hikes of all time, one can ask what condition, if any, could instigate a similar future drop for the biggest crypto asset. Dermot O’Riordan, a partner at venture capital firm Eden Block, recently gave his views on the matter.
“In the short term, Bitcoin’s value proposition as a non-sovereign hedge for the censorship-resistant dollar is getting stronger by the day,” O’Riordan told Cointelegraph. “Saying that, Bitcoin’s volatility is not going to disappear anytime soon, and I hope to see a lot of volatility in the coming years of those who are taking money from the table,” he said, adding:
“Something that is often overlooked, however, is that each new price milestone unlocks a new larger class of institutional investor with a mandate to buy the asset, which will ease the pressure on the seller’s side.”
Bitcoin has conquered a number of traditional financial giants, including MicroStrategy, MassMutual, Paul Tudor Jones and others. These players invested significant money in the digital value reserve in 2020, with the buying trend heating up in the latter part of the year.
Although the price of BTC continues to rise, recently exceeding $ 40,000, the asset still has its liabilities. O’Riordan noted Bitcoin’s two main long-term risks. The first: “How your approximate consensus governance mechanism handles issues around the protocol’s security budget if rates don’t go up enough to complement the ever-decreasing issue of Bitcoins,” he explained. The second he labeled “the risk of Bitcoin’s institutionalization disrupting the base layer without confidence”.
Bitcoin has overcome substantial adversity in the past 12 years, however, each time eventually recovering and resulting in greater adoption.