Will The Bitcoin Rally Falter?

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After Collapsing over 75% Bitcoin has staged a massive comeback nearing $30000

Most people expected bitcoin to come down from peak heights of $65,000+ as corrections are natural in any market, but the collapse below $16000 caught many off guard. The recent comeback rally in the price has given crypto investors hope but does it have any merit or is it just a short squeeze? While predicting the market in the short term is tough, predicting the long-term trajectory of an asset by using fundamentals is a lot more reliable of a strategy.

There’s major fundamental problems with crypto as a whole

The main trouble for crypto began with the FTX crypto exchange scam, where according to federal prosecutors the founder Sam Bankman Fried basically used FTX customer brokerage accounts as his own personal piggybank to funnel money into his other business, a crypto hedge fund. When his hedge fund blew up that obliterated most of his brokerage clients money (that he had taken out of their accounts without their knowledge to put into his fund). Read Full Story: https://www.cnbc.com/2022/12/18/how-sam-bankman-fried-ran-8-billion-fraud-government-prosecutors.html Now if the scandal had happened to a smaller crypto brokerage most people would’ve shrugged it off as some small crappy company committing fraud but this was an 8 billion dollar scam and that’s not even including all the companies that had loaned money to FTX that could get crushed as well. A major crypto company committing fraud damages the confidence in crypto as an asset, making large institutions less likely to invest in it. This is bad enough itself but it get worse.

FTX scandal will make governments crack down on crypto with tough regulations

Because of the size of this scandal there’s been a lot of public outcry, making politicians want to do something about it to please the populace. Doing what they do best, they’ll passed a bunch of laws to restrict it. Every asset needs regulations but too many will cripple investment in it. Knowing politicians, they’ll overdo it and strangle any new money trying to come in.

Limited Upside Potential

With big institutions scared away from crypto there isn’t any new source of money to prop it up. In order for bitcoin and cryptocurrencies to keep appreciating in value more money has to come in to bid up the price, but with retail investors tapped out its all up to the large institutional investors and they’re not participating after the FTX scandal. While I don’t think bitcoin will go to zero anytime soon, I see a whole lot of downside, and not enough money able to come in to make much upside. Therefore I don’t see this recent price rally as sustainable long term and don’t plan to be participating in it.

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