What will happen to cryptocurrency in 3–9 months (and beyond)? Socioeconomic analysis.
As I'm long on cryptocurrency, I want to be wrong about this. But better to play with money in rational truth than irrational optimism.
Let's first find three things that we can agree on.
First, the majority of the market follows BTC/ETH. The mechanism for how or why isn't too important. It's just the way it is. More importantly, this means any other cryptocurrency won't suddenly go to the moon without action from BTC/ETH. It's possible, but highly unlikely.
Second, although cryptocurrency is still new as a financial trading instrument, the only reasonable pattern, (and probably as unreliable as any other of the hundreds of made up chart interpretations) what we can learn about "all time high's" is that the last ATH for BTC and other older cryptocurrency was in DEC '17, and the record wasn't broken until almost 35 months later around NOV '20.
Third, it's reasonable to correlate the recent rise of prices to COVID19. Unemployment checks, stimulus payments, decreased rent, people stuck at home with nothing better to do than learn about investing for the first time in their lives, few things to spend money on outside of ordering gadgets online, etc... All those potentially had a huge effect on the recent rise. Could it have gone as high without COVID if at all? Maybe, we'll never know.
With those three conclusions, it's time to prepare ourselves for the fact prices may continue to drop for a few months, and not go anywhere near a new huge boost in ATH for maybe even a few months if not, a few years.
Here's why prices may continue to drop at least for the near term of 3-9 months. With COVID fears abd restrictions diminishing, restrictions lifted, and fresh ATH's reached, a lot of people have made a lot of money, and have cashed out. Without virtually untaxed and easy government money, would-be risk-takers are likely to be more attached to their hard-earned" cash as well.
People are making money from their new or old jobs, getting back into the world, interacting with friends and strangers again, and suddenly trading is no longer at the top of mind. That is specially while it's dropping which perpetuates a lack of interest until it becomes more stable.
Those who made a lot of money with cryptocurrency are enjoying their fastly accumulated cash in whichever way they find enjoyable. Therefore, at least in the near term, the money will be flowing out of cryptocurrency and back into the economy.
We will also have to guess that quarantine resulted in many peoole buying as many small gadgets and gizmos from ordering online out of boredom or desire. You can conclude that simply based on Amazon's sales. But the money is coming back out of cryptocurrency, and the only logical place they can go is back into the non-crypto world. Whether that be into the stock market, and going out and enjoying things or other big purchases.
So that explains why cryptocurrency may continue to drop in the near term of 3-9 months. Now let's look beyond 9 months. Note that this is obviously the futile task of predicting the future.
Most people with a solid foundation in blockchain and technology can support the argument that at least most of the top respected cryptocurrencies will be around for 5-10 more years.
So whether it will all suddenly disappear because we've been "in a bubble" is mostly pessimistic doomsday talk from people who can barely explain how blockchain works, let alone predict a "bubble." Their views might have been more realistic in the earlier years of BTC, but few worth listening to are calling cryptocurrency a bubble.
And who know's, maybe the peak of ~$64k was the bubble, and it popped - which is what we're experiencing. A bubble popping doesn't mean everything disappears, just like houses don't disappear with a housing market bubble, and not all companies disappeared during a dotcom bubble.
So now with the bubble-doomsday talk out of the way. We know at least BTC/ETH will be here to stay. And likely many others.
So how long will this current downtrend last? Probably for at least a few more weeks and months as described due to the 3-9 month socioeconomic outlook.
But more importantly, when will it start to shoot back up again? No one really cares about a market that's only stagnant. We can only guess based on BTC's history of somewhere around 9-36 months minimum - maybe longer. Quite possibly 48-60 months.
Yes, many new people have started using and adopting cryptocurrency. Mostly small traders and investors who helped the market rise. But if we assume (which hopefully makes an ass out of me) that such a globally impactful event like COVID was a main contributor to the recent rise of cryptocurrency, then when will the next major COVID-like event be that results in a stratospheric rise?
Hopefully never (but we know never is basically and unfortunately impossible).
So looking at the pattern of BTC/ETH, the 35 months between DEC '17 and NOV '20 provide a good marker of how long things can stagnate before new highs. If we also consider it was largely affected by a huge global pandemic too, then we have to wonder what event could possibly influence cryptocurrency that much?
Thus, there may be some small events along the way. But we may just have to rely on good ol' time and stories of adoption to give cryptocurrency a steady rise again.
The adoption of cryptocurrency will likely have a huge positive long-term influence on where it's going, and help keep it steady. But it probably won't create enough capital flowing (remember, most people who got in are not playing big with an investor's or even blockchain technologists mentality) to be as highly impactful as something like COVID.
That is all why we might expect cryptocurrency to continue declining over the next 3-9 months - people getting back to being people. And it will not go near all time highs again for more than 9-36+ months - without relying on a huge global event, we will have to depend on more rational smaller events plus greater adoption.
And I hope to be wrong.
So what can you do about it if you are worried about buying too high (besides the obvious of shorting cryptocurrency or managing your average)? If you borrowed and put too much into something as speculative and volatile as cryptocurrency, you might be screwed, sorry to say.
But other than that...
Enjoy life. Take a shot at or get back into stocks where micro-events can have a bigger impact on valuation. Make something. Take on a hobby. Hang out with friends. Whatever you want.