Bitcoin’s bull run could end if institutions are in trouble

Komodo executive: Bitcoin’s bull run could end if institutions are in trouble

Expert considers such scenario highly unlikely and theoretical, but not impossible

Bitcoin is known for its high volatility: in fact, it constantly swings between gains and losses. Although it has recovered quickly from the pandemic-induced by Bitcoin Circuit drop in March last year and has reached new all-time highs, this does not mean that the asset may not face similar events in the future.

Jason Brown, director of business development at smart chain platform Komodo, recently discussed what factors could cause another large drop in the price of Bitcoin (BTC), similar to the one in March.

Brown told Cointelegraph:

„I think such a scenario is unlikely as the current trend is towards institutional adoption. On the other hand, we could not have predicted that COVID would cause such a sharp crash and bear market in the short term, followed by the subsequent bull run that began in the summer of 2020.“

In March 2020, the price of Bitcoin plunged 50% in 48 hours, while similar collapses were occurring in mainstream markets. Since then, various mainstream giants, such as MicroStrategy and MassMutual, have gone public with their purchases of the cryptocurrency. MicroStrategy in particular, under the leadership of its CEO Michael Saylor, has become a big supporter of Bitcoin, in part as a protection against inflation.

Brown clarified how the institutions clearly have a long-term HODL mindset and are not speculating

Plans can change, however, when people or companies need to spend capital to stay afloat:

„You have to consider what might happen if the same mainstream institutions fail, even if that is related to factors outside the crypto market.“

As Bitcoin hovers around $40,000 these days, buying now means buying at the highest prices ever. The big players buying significant amounts of crypto are doing so at higher than average price levels, according to Brown:

„This means we could see a scenario where an institution enters a crisis due to falling or stagnant crypto prices, and therefore decides to sell below the market average.

Although highly theoretical and unlikely, this could cause a ripple effect in the opposite direction and send us back into a bear market. Earlier we talked about how whales (high net worth individuals) move the market, but now the total supply of major cryptos is even more centralised.

In the future, it could take just one big sell-off by a major institution to have a major impact on the market, even more so than the bear market that started in 2018.“

In 2018, Bitcoin’s price fell from $17,000 to under $4,000 in a short period of time.