What could make Bitcoin crash? The hypothesis of Dermot O’Riordan of Eden Block
In 2020, initial concerns about a pandemic caused Bitcoin to crash. What else could cause such a reaction?
During the market downturn in March 2020, the value of Bitcoin (BTC) plummeted by over 50% in the space of two days. In the same month, traditional financial markets also experienced significant Bitcoin Era losses. Despite Bitcoin’s exceptional recovery to new all-time highs, one might wonder what, if any, conditions might cause such a collapse in the future. Dermot O’Riordan, partner at venture capital firm Eden Block, recently had his say on the matter.
„In the short term, Bitcoin’s value proposition as a non-sovereign, censorship-resistant protection against the dollar becomes increasingly strong,“ O’Riordan explained to Cointelegraph. „That said, Bitcoin’s volatility isn’t going away anytime soon, and I expect to see a lot of volatility in the years to come caused by those who are in profit and want to cash in their winnings,“ he said, adding:
„However, often overlooked is the fact that each new price milestone unlocks a new, larger class of institutional investors determined to buy the asset, easing the selling pressure.“
Bitcoin has won over several mainstream financial giants, including MicroStrategy, MassMutual, Paul Tudor Jones and others. In 2020, these big names invested significant sums in the digital store of value, a trend that grew stronger towards the end of the year.
Although Bitcoin’s price continues to rise, recently exceeding $41,000, the asset still carries risks
O’Riordan pointed out the two most important ones in the long term:
„First, the way its crude governance mechanism by consensus handles budget issues for the security of the protocol, in case fees do not increase sufficiently to supplement the decreasing unit issuance. Second, the risk of Bitcoin’s institutionalisation that would undermine the trustless base layer.“
However, over the past 12 years Bitcoin has overcome great adversity, recovering each time and gaining greater adoption.