• Bitcoin has plunged 50%, and could plunge 50% more.
  • It’s clearly not as secure as once thought.
  • It seems unlikely this would ever become a legitimate currency.

Bitcoin (BTC-USD) prices have fallen 50% from their peak, and the bad news is that it probably has another 50% to fall. There’s no good way to figure out the fundamental value of Bitcoin since it produces nothing, has no yield, and is hardly a store of value.

Bitcoin Global Currency?

The concept that Bitcoin will someday become a global currency will never happen, never. No country will ever adopt Bitcoin as a standalone legal tender as it would likely create tremendous funding issues. It’s akin to being Greece during the European debt crisis in the early 2010s. The biggest problem Greece had back then – it was part of the euro. Because it was part of the euro, it had to adhere to the eurozone rules and did not have the ability to issue debt in its own currency, and therefore, couldn’t devalue it way out of its issues. It means that any country that decides to accept cryptocurrencies like Bitcoin would now be subject to similar issues as Greece. These concepts do not seem dissimilar, and a move to Bitcoin as a currency would be problematic.

There has been one attempt to take a step in that direction, but there appears to be hesitance even in this case. President Nayib Bukele of El Salvador is planning to make Bitcoin legal tender in his country. If approved, El Salvador would be the first country to integrate the cryptocurrency, and in this case, Bitcoin would be traded by choice and linked to their currency’s exchange rate to the US dollar. Stating it would be easier for citizens working abroad to make payments to El Salvador as the main reason for this move.

Not As Secure?

It may not even be as secure as once thought, given how the FBI recouped some of the ransom Colonial Pipeline paid out to hackers. How the FBI did it doesn’t matter, they did it, and it basically challenges the idea that Bitcoin, or perhaps any crypto, is as secure as we once all thought. That’s sending shockwaves through the entire crypto complex.

Big Bubble?

Bitcoin is no different than bubbles of the past. It even has the symmetry of a classical bubble and is imploding as quickly as it was created. If that pattern alone continues, it suggests a drop in Bitcoin back to 19,000.

bitcoin

Wave counts suggest the potential for even lower prices. The crypto appears to have just completed a wave 4 consolidation pattern and is likely in the early phases of a wave 5 down. Due to this wave count, it could result in Bitcoin falling all the way to 10,200. There’s one place it could stop prior, around 16,650. The only thing needed at this point to confirm this bearish pattern would be a decline below 30,000.

The relative strength index has a big downtrend in it as well, and that would suggest that momentum in Bitcoin is clearly bearish. The RSI is not even suggesting that there’s a bottom in place, as it has yet even to single a bullish divergence.

bitcoin

Of course, if Bitcoin were to fall as low as the chart suggests, it could lure in plenty of buyers. As of May 2021, it has been estimated to cost somewhere between $7,000 to $11,000 to mine one Bitcoin. There also are plenty of investors that will cling to Bitcoin because of the belief that it can operate like cash purchases and its low transaction fees.

While the future for Bitcoin may be as murky as ever, if one thing is certain, it will be a very bumpy ride.

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