Bitcoin and the other major cryptocurrencies have been trading in a relatively narrow range over recent weeks.
This, however, followed a rollercoaster ride that saw bitcoin climb from $6,750 at the beginning of November to a peak of $19,343 by mid-December. That´s a rise of 186% in a matter of weeks.
The volatility didn´t stop there though, as we then saw a dramatic sell-off, with bitcoin having plunged to $6,914 by early February — a peak-to-trough fall of over 60%.
Little wonder, investors are now scratching their heads as to which direction the crypto is likely to head next.
Over the past few weeks, bitcoin appears to have become stuck in some sort of consolidation phase, trading in a relatively narrow range.
Bitcoin did put on a recovery rally, rising from $6914 on February 5 to trade at well over $11,000 by February 20.
Bitcoin hasn´t been able to make much headway since then, however. On Tuesday, bitcoin was trading at around $10,900.
The key question in many investors´ minds now is whether bitcoin will ever recover to near the $20,000 peak level of December.
And if bitcoin has further to fall, what is the bottom going to look like?
Such questions are especially tricky with something like bitcoin. It´s very difficult to weigh up the cryptocurrency´s prospects in a traditional sense as one would with a fiat currency.
If we we´re talking about the dollar, we could look at the Federal Reserve´s monetary policy or consider other key factors such as the strength of the US economy.
If we think of bitcoin more as an asset than as a traditional currency, it still can´t be valued in the way that a company´s stock can. There´s no dividends or earnings growth to plug into a clever financial equation.
At the same time, bitcoin arguably doesn´t have the track record of commodities such as gold, where long-term supply and demand factors may be properly considered.
Bitcoin is probably best thought of as an alternative, speculative asset, so long-term forecasts are likely to be highly sketchy.
There are some similarities with gold, however, at least conceptually that is. Like gold, there is theoretically a finite supply.
So far, about 12 million bitcoins have been digitally mined. Unless bitcoin´s protocol is somehow altered to create further supply, there are just 9 million more available for mining
Rather than this latter factor, long-term holders of bitcoin should be more worried by potential competition.
Bitcoin is based on blockchain technology and, like all technologies, they generally become more easily accessible and cheaper to recreate over time.
To be bullish about bitcoin´s longer-term prospects necessitates having a positive view on bitcoin´s longer-term demand, even if we take the view that bitcoin is essentially finite.
While intra-day volatility may still present powerful opportunities for traders, there seems little to justify bitcoin as a long-term investment.
World-renowned economist Kenneth Rogoff said on Tuesday he believed bitcoin was more likely to be trading at $100 than $100,000 in a decade from now.
"I think bitcoin will be worth a tiny fraction of what it is now if we're headed out 10 years from now,” Rogoff told US broadcaster CNBC.
Rogoff sees the demand side of the equation as tenuous.
“Basically, if you take away the possibility of money laundering and tax evasion, its actual uses as a transaction vehicle are very small,” said Rogoff.
It is the growing threat of regulation, however, that Rogoff pinpointed as the likely source of another sharp drop for bitcoin.
Indeed, regulatory crackdown has already been a big reason for bitcoin´s price weakness so far in 2018.
China has been among those countries leading the regulatory assault against bitcoin as it seeks to rein in the crypto.
A country where the state still likes to have a big hand in planning the economy was always likely to be a difficult place for bitcoin.
China is not alone, with other Asian countries such as Japan and Korea also taking steps to assume greater control of cryptos.
Certain EU countries, along with the US, are also beginning to consider their own measures to regulate bitcoin.
Bank of England Governor Mark Carney is among those calling for regulation.
“The prices of many cryptocurrencies have exhibited the classic hallmarks of bubbles including new paradigm justifications, broadening retail enthusiasm and extrapolative price expectations reliant in part on finding the greater fool,” said Carney in a speech to the inaugural Scottish Economics conference last week.
If Carney is right, and the outlook really hinges on the "greater fool", then bitcoin could easily be worth just $10 a decade from now.