Analysts at Fidelity Investments tell us why we shouldn’t worry about Bitcoin falling

February 19, 2022 by cryptobreak

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Worried about Bitcoin’s falling price and the possible end of the growth phase of the crypto market? Fidelity Investments analyst Jurrien Timmer has some advice on that: crypto investors should focus on the fundamental growth of the Bitcoin ecosystem. And it is, according to Timmer, really impressive. That’s why the debate around the downtrend and panic the expert considers “mostly unnecessary hype”. We tell you about the situation in more detail.

It should be noted that Bitcoin is really not looking good right now. After hitting a high of $69,000 in November, the cryptocurrency as a whole is in a prolonged decline phase. Here’s a daily chart of BTC, which shows, among other things, the absolute record of the exchange rate.

Bitcoin daily chart

What’s going on with Bitcoin?

Timmer elaborated on his point of view on Twitter. Here’s his first post from a track published by news outlet Cointelegraph.

Bitcoin has been in a volatile trading channel for almost a year now, bouncing off the $30,000 and $65,000 levels. Predictions about the rise or fall of BTC have become a favourite hobby for many, but it’s all nothing more than hype. In the case of Bitcoin, what matters most is the fundamental development of the cryptocurrency’s network.

In other words, the expert recommends paying attention to other indicators of the main coin's network. For example, in September 2021 Bitcoin officially became the national currency of El Salvador, and the MicroStrategy giant continues to accumulate BTC and has already accumulated several billion dollars in it. Apparently, BTC is not a niche geek fad - it is now a full-fledged asset class .

Bitcoin chart

The expert compared Bitcoin’s network effect to the development of Apple, which has become a tech giant with a capitalization of over a trillion dollars. Here is his rejoinder regarding this similarity.

Apple’s share price has risen 1,457 times since 1996, while its price to sales ratio has risen 30 times. If growth in capitalisation valuation is an exponent of growth in sales according to Metcalfe’s law, then the price should increase in line with the exponent of both.

Apple’s growth in fundamentals

Applying this hypothesis to Bitcoin shows impressive data. For example, Bitcoin’s price has risen 640,633 times between its inception and the end of 2021. And the ratio of its price to network growth – or the equivalent of the price to sales ratio for a stock – has turned out to be 52. Over the same time period, the ratio has risen almost 867 times. The expert continues.

If we apply Metcalfe’s law and calculate the square of 867, we get a value of 751,111. It almost coincides with the aforementioned 640,633 times increase in the cryptocurrency price.

It should be noted that Timmer is not the first to predict a sharp spike in the BTC exchange rate. Earlier this month, El Salvador's President Nayib Bukele did the same. The main argument in his position was the limitation of the maximum number of bitcoins, which will not exceed 21 million. Read more about his point of view in a separate piece.

The rise in value of the Bitcoin network

What conclusion can be drawn from this? In Timmer’s opinion, the growth of the Bitcoin network and Apple’s development are very similar because the dynamics of their fundamentals are almost identical. In other words, BTC will follow a similar development path in the future. Given that the cryptocurrency itself is still in the early stages of adoption, the bitcoin value ceiling has not yet been reached and the coin has room to grow.

Timmer is even willing to give a rough guideline for his prediction: according to the expert, Bitcoin will definitely cross the $100,000 mark in the foreseeable future. To back up his point, he also compared the potential growth of the cryptocurrency ecosystem to the development of the Internet and the increase in the number of mobile phone users.

Comparing Bitcoin’s growth to the adoption of the internet and the spread of mobile phones

True, a massive bullish trend is almost impossible without major corrections, one of which we are just seeing in early 2022.

Bitcoin chart comparison

For example, a crypto analyst nicknamed BTCfuel stated that this year’s Bitcoin chart strongly resembles a similar price movement in 2013 – just before another jump in the value of BTC to an all-time high above a thousand dollars. However, time will put everything in its place, as usual.

We believe that Bitcoin's potential has yet to really unfold. However, the cryptocurrency is only recognized as a national currency in one country, and it does not have many large institutional investors. Therefore, as digital assets develop and the number of users grows, their exchange rates will also be affected.

What do you think about this? Share your opinion in our Millionaire Crypto Chat. There we will talk about other topics related to crypto and decentralisation.