Early concerns about the pandemic caused Bitcoin to collapse in 2020. What else could cause a similar reaction?

During the market downturn in March 2020, Bitcoin (BTC) fell more than 50% in value over a two-day period. Traditional financial markets also fell sharply in March. Although Bitcoin recorded an outstanding recovery, breaking its historical highs, one might wonder what condition, if any, might instigate a similar future decline for the largest asset in the crypto currencies. Dermot O’Riordan, a partner in the venture capital firm Eden Block, recently expressed his opinion on the matter.

„In the short term, Bitcoin Victory value proposition as a non-sovereign hedge resistant to dollar censorship is growing stronger every day,“ O’Riordan told Cointelegraph. „Saying that, Bitcoin’s volatility won’t go away soon, and I expect to see a lot of volatility in the next few years from those who are in the money taking money off the table,“ he said, adding:

„However, something that is often overlooked is that each new price milestone unlocks a new, larger class of institutional investor with a mandate to buy the asset, which will cushion the pressure on the sell side.“

Bitcoin has earned the approval of several conventional finance giants, including MicroStrategy, MassMutual, Paul Tudor Jones and others. These players invested a significant amount of cash in the digital store of value in 2020, and the buying trend intensified in the latter part of 2020.

Although the price of BTC continues to rise, recently exceeding USD 40,000, the asset still has its downsides. O’Riordan pointed out Bitcoin’s two main long-term risks. The first: „How its roughly consensus governance mechanism handles questions about the protocol’s security budget if fees don’t increase enough to supplement Bitcoin’s emission reduction,“ he explained. The second labeled it as „the risk that Bitcoin institutionalization will hinder the base layer without trust.

Bitcoin has overcome substantial adversity over the past 12 years, however, it has increasingly recovered and ends up seeing greater adoption.