It’s very difficult — if not impossible — to understand the price movement of Bitcoin (CCC:BTC-USD). Pretty much all we really know with any certainty is that Bitcoin has suffered since early November.
In fact, it has shed approximately 35% of its value since then. But no one really knows what’s underpinning that movement. Recent signals from the Federal Reserve suggest that quantitative easing will taper off soon. Yes, this will make speculative bets less appealing, but that’s only one factor in Bitcoin’s latest prolonged decline.
As with stocks, most are left playing Monday morning quarterback when attempting to note where crypto prices are headed. I don’t know, neither does anyone else. Bearing that in mind, let’s look at some Bitcoin news and take some guesses.
Unrest in Kazakhstan
One interesting piece of news related to Bitcoin comes from the Central Asian country of Kazakhstan. The country is thought to account for roughly 5% of the global hashrate of Bitcoin.
So, given that Kazakhstan recently shut off its internet, the Bitcoin hashrate should have suffered too. However, the hashrate has already rebounded even though the blackout continues.
Here’s one possible explanation from the digital finance focused publication Trustnodes:
They (the miners) may however have satellite connection or other backup, or the blackout is limited to residential areas because although there was a small dip in hash from 207 Exahashes a second (Ex/s) on January 1st to 168 Ex/s on January 3rd, it has risen since to 180 with the blackout occurring while the hashrate rose.
That doesn’t tell us much about price, but it provides some interesting insight into Bitcoin’s hashrate and its connection to the country’s blackout.
Bitcoin Dividends for Certain Shareholders
That dividend, the equivalent of 5 cents, is payable in USD or in BTC-USD. For those who choose the BTC-USD option for the dividend, they will have to provide their own Bitcoin wallet and fill out an extra Securities and Exchange Commission (SEC) form.
That means that those who opt for the Bitcoin payment stand to potentially receive dividends that grow. In other words, fluctuations in BTC-USD prices mean that 5 cents of BTC-USD could appreciate by 10-20% very reasonably. That’s especially true given that BTC-USD has fallen precipitously of late.
If it rebounds, as it has before following crashes, 5 cents becomes something like 7 cents. Not bad.
This bit of news also tells us little about price generally. Bitcoin is becoming more accepted if firms are now paying it as a dividend, but that doesn’t mean prices will rise or fall.
However, the opinion of Wall Street firm Goldman Sachs (NYSE:GS) likely has some greater sway.
Goldman Sachs on BTC-USD
Goldman Sachs analyst Zach Pandl believes Bitcoin will become increasingly important as a store of value in 2022. He projected that if Bitcoin captures 50% of gold’s market, then it could pass the $100k price threshold.
Pandl commented in his research note to clients:
Bitcoin may have applications beyond simply a “store of value” – and digital asset markets are much bigger than Bitcoin – but we think that comparing its market capitalization to gold can help put parameters on plausible outcomes for Bitcoin returns.
This line of thinking harkens back to early discussions in the digital finance community around Bitcoin in which it is likened to gold, and that Ethereum (CCC:ETH-USD) is analogous to oil.
What to Do With Bitcoin Going Forward
I think that last bit of news at least gives us some indication of where Bitcoin may be headed. That direction is upward to be sure if Goldman Sachs’ Pandl is correct.
Further, let’s imagine Bitcoin passes that $100k threshold because it gains greater recognition as a store of value. It would probably be much more stable in that scenario. Investors would be likely to reward Bitcoin if it gains such a market share.
It’s a hypothetical case, but institutional opinion matters. The more Wall Street is on board, the more crypto rises.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.