Large Investors Anticipate Bitcoin`s Bubble To Burst

The crypto community is experiencing one of its most-bullish moments, as the crypto sector almost tripled its market capitalization over the past three months, surpassing the $1trillion mark for the first time in its history. 

However, a survey from Deutsche Bank suggests an alarming scenario for Bitcoin, the industry’s leader. Almost half of the biggest money managers noted that Bitcoin is a certain financial bubble. Furthermore, the managers agreed that Bitcoin is likely to lose its price point by 50%. The managers did also compare the hype around Bitcoin with a representative from the traditional stock market world – Elon Musk’s Tesla, which exploded on the stock markets.

Money managers are basically obliged to buy and sell securities and other assets for the profit of their clients, so the bubble stance may provide the crypto community with a perspective about possible large market fluctuations in 2021. 

Managers can actually be right in their predictions, as the largest cryptocurrency by market capitalization to date managed to triple its price in just three months, reaching an all-time high of $41,941.56 on January 8, 2021. Since then, Bitcoin’s price endured a hard correction, which pushed Bitcoin’s price down to around $33,000. Currently, Bitcoin managed to erase some of the losses and is trading at $34,448.79, according to Cryptobrowser.io.

However, not all investors are agreeing on the bubble mantra. Pantera Capital noted in an investment letter, that the recent Bitcoin price pump is a direct consequence of the May 2020 Bitcoin halving, which reduced the mining rewards on the network. 

Dan Morehead and Joey Krug of Pantera even predicted that “Bitcoin would peak at $115,212 /BTC in August 2021,” if the historical post-halving data repeats itself.

Meanwhile, Pantera’s bullish stance on Bitcoin is accompanied by an all-time high in Bitcoin nodes. According to data from Bitnodes.io, there are 11674 nodes in current operation. The all-time high comes amid a new version of the Bitcoin Core protocol, which lets Bitcoin nodes function and communicate with each other. The new version, dubbed 0.21.0 was released for public download on January 14 and is currently operating on 670 nodes, which is 5.74% of all nodes in operation.

The long-awaited Core update comes with improved functionalities, including a way to create more predictable testnets via Taproot consensus rules, which don’t have to be executed on the testnet. The Taproot consensus acts as a layer of privacy, as it doesn’t allow spending conditions to be seen. The rules come as Bitcoin Improvement Proposals (BIP) 341 and 342.

A further privacy update is the extended support of Tor browser’s v3.0, as the support for v2 in the current Core version would be deprecated later in 2021. Tor browser became a preferred way for Bitcoin nodes to operate on and it runs 25% of nodes.

The vital update comes amid more and more crypto holders deciding to run their own nodes, rather than leaving their cryptos in the hands of crypto custodians. The self-custody option is also present in Satoshi Nakamoto’s original vision of Bitcoin, as private node operation ensures decentralization.