During the market downturn in March 2020, Bitcoin (BTC) lost over 50% in value within two days. The traditional financial markets also fell sharply in March. While Bitcoin made a stellar rebound and continued to hit all-time highs, one might wonder what condition, if any, could trigger a similar future decline for Crypto’s largest asset. Dermot O’Riordan, partner in venture capital firm Eden Block, recently shared his thoughts on the matter.
“In the short term, Bitcoin’s added value as a non-sovereign censorship-resistant hedge against the dollar is growing day by day,” O’Riordan told Cointelegraph. “If we say that, Bitcoin’s volatility is not going to go away anytime soon, and I anticipate that money-makers will experience a lot of volatility in the years to come,” he said, adding:
“However, it is often overlooked that with each new price milestone a new, larger class of institutional investors is activated with the order to buy the asset, which will dampen the pressure on the sell side.”
Bitcoin has won over a number of mainstream financial giants including MicroStrategy, MassMutual, Paul Tudor Jones, and others. These players poured considerable money into the digital store of value in 2020, with the buying trend intensifying in the second half of the year.
Although the price of BTC continues to rise and recently topped $ 40,000, the asset still has its liabilities. O’Riordan pointed out the two biggest longer-term risks of Bitcoin. The first: “How its crude consensus governance mechanism handles issues surrounding the protocol’s security budget when fees don’t rise enough to complement Bitcoin’s ever-decreasing spending,” he explained. The second he described as “the risk that the institutionalization of Bitcoin hinders the trustworthy base layer”.
Bitcoin has overcome significant difficulties over the past 12 years, but each time they recovered and resulted in greater adoption.