Bye-Bye Bitcoin Bear

The bitcoin (BTC) bear market of 2022-2023 was a doozy. Having also held bitcoin through the bitcoin bear market of 2018-2019, I can attest that this one was just as painful despite being slightly shorter and having a less dramatic maximum drawdown.

Perhaps my increased financial exposure this time was the reason for this difficulty. Or maybe it was my shattered hopes for better-informed mainstream media coverage, as I found myself addressing the same old worries as before (prohibition, quantum computing, environmental effects).

Regardless, I’m glad to see the tail end of this bear. Although nothing is certain, barring any significant negative surprises, like the COVID-19-induced bitcoin liquidation of March 13, 2020, the bitcoin bear market of 2022-2023 is likely over. Here’s why:

So what does the future hold? I don’t make short-term price predictions. But if bitcoin’s four-year cycle plays out again, and I expect it will, then a few things are true.

We will probably never see $16K bitcoin again. Two cycles ago, bitcoin’s price never revisited the lows after it returned to the pre-capitulation price low. One cycle ago it almost revisited the low, but it required a massive market liquidation due to the COVID-19 pandemic. The next bitcoin halving is less than a year away. Absent a major liquidation event, bitcoin’s price has likely bottomed.Bitcoin remains regulatory teflon. Bitcoin has proven to be relatively immune to regulatory pressures. It’s been clear for years now that bitcoin is a commodity and not a security. Even the ultra-active current Securities and Exchange Commission Chair Gary Gensler, who has been the most active and aggressive chairman I’ve seen in my professional career, admits that there is only one crypto asset that is clearly a commodity (and, by implication, not a security). He obviously means bitcoin. With or without him, the SEC will likely continue to pursue actions that imply the vast majority of digital assets are securities. None of this risk sticks to bitcoin.Financial advisors and institutions are severely under-allocated to bitcoin. I can attest from my involvement with Swan Advisor Services that financial advisors and their clients are significantly under-allocated to bitcoin. In prior cycles they had reasonable excuses for that positioning, including a lack of reasonable products and significant regulatory risks. For the broader digital asset market, these problems largely remain. But for bitcoin they are largely solved. Therefore, I expect major adoption of bitcoin by financial advisors in the coming bull market.