Fidelity Analyst Explains Why Bitcoin Boom And Bust Days Are Over
According to Jurrien Timmer, a macro analyst at Fidelity, the days of Bitcoin (BTC) shooting up 10X and then crashing 80% are in the past.
Timmer shared a thread to his 107.9K followers on Twitter that the wild price action that Bitcoin experienced its previous bull cycles might not happen again, as institutional investors are entering the market.
Bitcoin, boring? Gasp! But boring is good if you want institutional adoption. ? pic.twitter.com/GiNqHpPe6a
“Until recently, Bitcoin would often overshoot its intrinsic value to the upside during bull markets and to the downside during bear markets. It was a momentum game with little to no resistance, until the trend reached exhaustion.”
According to the analyst, Bitcoin is currently following a demand curve based on network growth or the rise in the number of users moving into BTC space.
“Is the efficient market hypothesis replacing the go-go price discovery of yesteryear? The chart [below] shows Bitcoin’s fundamentals. The supply curve is dictated by the S2F model (stock-to-flow), and the demand curve is driven by network growth (Metcalfe’s Law)…
In recent months the price of Bitcoin has stopped tracking the S2F model and has instead hugged the pink line (demand model). That makes sense to me.”
He also argued that the demand model creates an efficient two-way market for BTC where investors accumulate the asset during price corrections and efficiently unload BTC when the asset rallies.
“As Bitcoin’s value becomes better understood by more and more investors, there could be more efficient accumulation when Bitcoin swoons, and more determined distribution when it moons. That’s what makes a two-way market.”
Also, large investors entering the market will most likely reform the future price action of Bitcoin according to Timmer.
“Remember, price is what you pay, but value is what you get. In the early days, most investors only knew the price. But as investors better understand valuation, Bitcoin is less likely to resemble the early boom-bust days and could start behaving like a traditional risk asset.”
