Bitcoin for the long term: What’s the outlook?

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Bitcoin is the oldest virtual cryptocurrency with the largest market capitalisation. One of the factors that make bitcoin unique is its limited supply. Currently, over 18 million are in circulation out of a pre-decided number of 21 million bitcoins that will ever exist. It is expected to be fully mined by 2140. The limited supply makes it a good hedge against inflation as well as a store of value. However, with bitcoin trading at $31,658 falling more than 50% from the highs of nearly $64,000 in May, what does the future hold for bitcoin. Experts say that long-term investors can diversify their portfolio as a hedge against inflation.

“Bitcoin is still giving a massive return to those who invested last year. We don’t know how it will behave in the short term but in the long term, the outlook is positive. In the last three to six months, new investors of around 30-40%  have been added globally. These are positive developments but when will it affect prices we don’t know. I think in 2-3 years there will definitely be an upward trend. It is difficult to say in the short term,” said Nischal Shetty, founder and CEO, WazirX.

“Crypto-assets like bitcoin and Ether have usually corrected 50% from every previous all-time high before restarting their upwards momentum towards a new peak price. Extending the same pattern to the current phase, the correction in prices of most crypto assets has now plateaued, and it will be crucial to see how they react in the medium-term now. The long-term outlook for bitcoin remains quite positive and investors with an appropriate investment horizon are sure to benefit from decent capital appreciation going by BTC’s historic behavior,” said Sumit Gupta, CEO and co-founder, of CoinDCX.

One of the indicators to know about the trajectory of bitcoin prices is the Kimchi premium, which is the difference between the price of bitcoin on South Korean exchanges and the international prices. The Kimchi premium was around 50% when bitcoin was around its all-time-high. Later, it dropped to 25% in April, and now the difference has fallen sharply to about 3%, suggesting lower demand in South Korea, which is an influential market for Bitcoin pricing.

“Kimchi premium was first mentioned in 2016 when bitcoin prices in South Korea were found to be higher than international prices. For example, if bitcoin was Rs100 in the international market, it was trading at Rs 120 in South Korea. It is important because it is an indicator of bitcoin prices. If the premium is higher, it indicates the bull market and when it is less, it hints towards the bear market. So it indicates the prices,” Shetty told Money9.