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Here’s When and How Bitcoin (BTC) Price Will Start a Recovery Wave!

6 min ago2 min readBitcoin
Here’s When and How Bitcoin (BTC) Price Will Start a Recovery Wave!

It is evident that market participants continue to be concerned about possible FTX fallout contagion. Therefore, market participants are unloading their assets from the exchanges, which could lead to the final stage of the ongoing bear market. However, a macro expert predicts that when investors start investing again in digital assets, the market for Bitcoin will grow tremendously.

Raoul Pal, a former executive at Goldman Sachs, said that a bull run in Bitcoin will start when the macroeconomic environment improves enough to cause a surge of liquidity.

“When liquidity returns (the biggest driver of institutional allocations), the value of the network should rise, which then brings in more investors (or vice versa – # of investors rising will bring in more investors) which creates a multiplier effect, giving exponential returns.”

Pal said that given the current level of network activity, Bitcoin is poised for an explosive rally. He asserts that even though transaction values decline during bear markets, the proportion of active users increases. Due to the mathematical multiplier, prices increase exponentially as adoption (users) and value (uses) increase.

When liquidity returns (the biggest driver of institutional allocations), the value of the network should rise, which then brings in more investors (or vice versa – # of investors rising will bring in more insto's) which creates a multiplier effect, giving exponential returns.— Raoul Pal (@RaoulGMI) November 16, 2022

He also said that Metcalfe’s Law-based Bitcoin model demonstrates that network users have not decreased as in prior bear markets. Metcalfe’s Law argues that a network grows in value as the number of users on the network increases.

The level of network activity peaked in 2020 and then again in 2021 and has since been declining. This liquidity cycle correction’s magnitude has by far been less than earlier examples, according to Pal.

“The number of active users is pretty flat on average. Note how big the number of active users was in 2018 and the number who left in 2019.This bear market is very different as users have remained broadly stable as deeper adoption takes hold vs pure speculation.”

All market participants have been under a lot of pressure as a result of Bitcoin’s sharp decline over the past few months. Fearing further decline, several investors sold their coins at steep losses and withdrew from the market. BTC is now trading at $16,686 at the time of writing.

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