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During the market downturn in March 2020, Bitcoin (BTC) lost over 50% in value over a two-day period. Traditional financial markets also fell considerably in March. While Bitcoin has shown a remarkable rally, continuing to smash all-time prices, it is questionable what condition, if any, could cause a similar future decline for the largest crypto asset. Dermot O’Riordan, a partner at venture capital firm Eden Block, recently gave his opinion on the matter.
“In the near term, Bitcoin’s support for value as a censorship-resistant non-sovereign hedge against the dollar is strengthening day by day,” O’Riordan told Cointelegraph. “That said, Bitcoin’s volatility isn’t going away anytime soon, and I expect to see a lot of volatility for years to come from those who take money off the table,” he said, adding:
“Something often overlooked, however, is that each new price step opens up a new, larger class of institutional investors with a mandate to buy the asset, which will ease the pressure on the sell side.”
Bitcoin has conquered a number of traditional financial giants including MicroStrategy, MassMutual, Paul Tudor Jones, and others. These players have invested significant liquidity in the digital store of value in 2020, with the buying trend heating up in the latter part of the year.
Although the price of BTC continues to rise, recently reaching $ 40,000, the asset still has its liabilities. O’Riordan noted Bitcoin’s two main long-term risks. The first: “How its rough consensus governance mechanism handles issues around the protocol’s security budget if fees don’t increase enough to complete the reduction in Bitcoin’s issuance,” he explained. The second he called “the risk that the institutionalization of Bitcoin will hamper the base layer without trust.”
However, Bitcoin has overcome substantial adversity over the past 12 years, recovering each time and leading to greater adoption.
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