By AFIQ AZIZ / Pic AFP

LEADING cryptocurrency Bitcoin’s downtrend is expected to end at the current phase and it will be highly volatile before having a rebound by end of the year.

Within the last seven days, Bitcoin price dipped 17% from its new all-time high of US$64,594 (RM266,417) to US$53,575, according to data collected by CoinGecko.

The price has been hovering between US$50,000 and US$60,000 since early February, indicating the new asset class heaven has potential to climb further this year, with a possibility to reach the price of US$100,000 amid more institutional players coming on board.

Tokenize Technology (M) Sdn Bhd CEO and CTO Hong Qi Yu, however, cautioned some corrections before it could reach such heights.

“Bitcoin is going to be very volatile. According to some metrics, we are reaching first top and awaiting significant correction before we follow back ‘Plan B S2F model’ to reach above US$100,000 price zone,” he told The Malaysian Reserve (TMR) yesterday.

Plan B’s stock-to-flow model, known as (S2F or S2FX), is a popular chart that measures the existing number of Bitcoin in circulation (stock) and pairs it against the number of issued coins minted during mining (flow).

To many crypto enthusiasts, the S2F model so far has been fairly consistent and follows along the mapped trajectory Plan B and others’ estimates.

In November 2020, the S2F creator doubled down and told the public that there was “no doubt whatsoever” in his mind that his S2F model was “correct”.

Hong said the recent dip of Bitcoin was caused by the blackout in Xinjiang, China.

The place comprises 40% of Bitcoin hash power, he explained. Hashrate refers to the total combined computational power that is being used to mine and process transactions on a proof-of-work blockchain, such as Bitcoin and Ethereum.

“Xinjiang blackout shows that Bitcoin, although in a decentralised structure, still has some work to do (outside the system).

“A 40% hashing power is in the same province, while more than 50% is in the whole of China.

“It creates the possibilities of a single point of failure.

“For an asset with more than US$1 trillion market capitalisation, it cannot be bound to that failure,” Hong added.

But he is optimistic that Bitcoin will increase by year-end, as it will be supported by mass adoption either from institutions or the retail side.

“Currently six out of 10 people in the world know Bitcoin and get their hands on it, compared to 2017 and 2019, which was only two out of 100 ratio.

“More institutional and mainstream getting access and limited supply will create demand upward spiral,” Hong added.

CoinGecko COO Bobby Ong is of the view that the market is currently in a strong bullish cycle for Bitcoin, mainly driven by US institutions such as MicroStrategy Inc buying Bitcoin at around the US$50,000 levels.

“The pullbacks over the weekends were (also) driven by retail users being irresponsibly long and liquidated causing other cascading liquidations.

“These drawdowns have been happening increasingly frequent and it is very common for crypto-currencies to drawdown 20% to 40% especially on weekends when orderbooks are thinner,” he told TMR.

As of now, Bitcoin is still leading more than 50% of the market with more than US$1 trillion market capitalisation, although its market shares dropped from over 60% compared to last year, with investors having more digital assets to opt for which grew since the past two years.

There are more than 9,000 digital coins being traded throughout the world, valued at US$2 trillion, compared to only around 6,000 year-on-year, according to CoinmarketCap.com.

But Bitcoin is still the benchmark of crypto, Hong observed, besides the rising crypto-like Dogecoin, which rose 488% since last week.

“This might shift the dynamic of attention and benchmarking of the alternative coins (coins that are other than Bitcoin).

“For example, Dogecoin appreciated, while bitcoin experienced a 20% correction yesterday,” Hong added.