The venture capitalist, who has always bet on the rise of bitcoin, is confident despite the difficulties of the crypto space.
The rout of the cryptocurrency market in 2022 scared away individual investors.
The latter had flooded the sector a year earlier in the midst of the crypto craze in the hope of making a quick buck.
But the fall in prices of most cryptocurrencies and numerous scandals have crushed all these dreams.
The crypto market has lost over $2.1 trillion from its all-time high of over $3 trillion reached in November 2021. This drop means that investors have seen the value of their portfolios melt away. For some individual investors, almost all of their savings have evaporated.
Bitcoin (BTC), the world’s leading cryptocurrency by market value, has fallen from am all-time high of $69,044.77 reached on November 10, 2021 to $16,746.62 currently, according to data firm CoinGecko. When many individual investors joined the crypto craze at the end of 2021, BTC evangelists predicted that the cryptocurrency was on its way to hitting $100,000 before the end of 2021.
Lured by these tantalizing predictions, many retail investors gave in to FOMO, which stands for Fear of Missing Out. FOMO is a crypto acronym used generally for anxiety of missing out on making money.
While the market slump has chilled amateur investors, BTC and crypto evangelists have not lost faith even as they got their fingers burned. This is the case of billionaire venture capitalist Tim Draper. He predicted that bitcoin would hit $250,000 by the end of 2022.
He just reiterated that prediction for 2023 in an email to CNBC. Given the current price of bitcoin, this means the digital currency will soar 1,400%.
“My assumption is that since women control 80% of retail spending, and only 1 in 7 bitcoin wallets are currently held by women that the dam is about to break,” Draper told the news outlet.
Draper believes that there are positive factors to restart the rise of cryptocurrency.
“I suspect that the halvening in 2024 will have a positive run,” the founder of Draper Fisher Jurvetson told CNBC.
The halving is an essential phenomenon of the Bitcoin protocol which takes place approximately every four years. It consists of halving the reward given to bitcoin miners who register new blocks on the blockchain.
The Bitcoin protocol contains a number of rules written into its code and which cannot be violated. The first of these is the limitation of the number of bitcoins: there will never be more than 21 million bitcoins in circulation. It is this notion of scarcity that makes the value of bitcoin.
Originally, the Bitcoin network’s initial block reward was 50 BTC. But a special clause in the protocol, another rule that cannot be transgressed, reduces this reward over the years: it is the halving.
Every 210,000 blocks, the miners’ reward for maintaining the Bitcoin network is thus halved. The halving therefore has a dual purpose: it limits the quantity of new bitcoins in circulation on the network and allows the longevity of the blockchain to continue.
Since a new block is created approximately every ten minutes on average, the halving generally corresponds to a duration of four years. There is nothing to do for the halving to occur, since it is written into the source code of the crypto-asset: the rewards are automatically halved when it occurs.
The big problem with Draper’s prediction is that there is a lot of uncertainty currently surrounding the cryptocurrency industry. We still do not know all the collateral victims of the bankruptcy of the empire of Sam Bankman-Fried, the former disgraced king of crypto.
Bankman-Fried’s crypto empire imploded within days on Nov. 11 after being at the center of the crypto industry. This empire was made up of the FTX cryptocurrency exchange and its sister company Alameda Research, a hedge fund that also served as a trading platform for institutional investors.
The regulators are trying to piece together what happened, and especially how FTX, which was valued at $32 billion in February, could implode overnight.