Despite geopolitical tensions and an unpredictable market, contrary to expectations, the price of bitcoin has soared in recent weeks. Charlie Erith, CEO of ByteTree, the specialist in digital asset data and analysis, explains why the price of bitcoin might not be as remarkable as it seems:
“Thought experiment: it’s the end of January 2021. The bitcoin price has risen to a fraction over US$33,100. It has doubled in the 10 weeks since mid-November and has risen 4.9x since January 1st 2020. Everyone’s talking about it, activity is frenzied, and there isn’t a strategist on the planet telling you that it’s not a bubble…
Now, what would your bitcoin price prediction have been for 27th March 2022 (yesterday’s date), if you were given the following information about the year ahead?
1. Energy prices will be through the roof, oil has more than doubled
2. Russia will invade Ukraine and be largely cut off from the global economy
3. China will shut down all bitcoin mining
4. The US President will issue an executive order to regulate crypto
5. Physically backed bitcoin ETFs will continue to be rejected by the US SEC
6. The ARKK Innovation Fund will fall by 55%
7. Microstrategy’s share price will fall 30%
8. Coinbase will IPO in April but will be down nearly 50% from its peak
9. Central banks will be raising interest rates
Forgive me if I’m wrong, but I don’t think your answer would have been, “Bitcoin will be up 41%”.
I also doubt you would have predicted that it would outperform gold, the FTSE, Nasdaq and the S&P500 while demolishing Cathy Wood’s portfolio of next-generation disruptors. It’s also outperformed Amazon, Tesla, Scottish Mortgage Investment Trust, Facebook, Schroders, China, Lindsell Train Investment Trust and India. Well done Apple for keeping pace, and hats off to the oils and banks for doing better, although the last two won’t want to compare stats much further back.
Is it still possible, even for the most cynical observer, not to consider that something interesting might be happening here?
Bitcoin and crypto is an escape opportunity from a system that is failing a great many people. Some are in developing countries where they are trapped by debt or financially excluded because of exorbitant asset prices, and some are in emerging markets, with failing currencies and corrupt leadership. Bitcoin is a multi-faceted, bottom-up, borderless phenomenon.
Seen in this light, is the price of bitcoin really so remarkable, with advocates this zealous? They’re excited, engaged and imbued with hope. They see a reinvented future that is fair and optimistic. They know that there are tough battles ahead but, they would rather fight those battles than turn around and return to a system that has let them down.
Bitcoin is holding its price against a backdrop of events that its nay-sayers would expect to have sunk it and continues to be adopted at both a retail and institutional level. We are in the early stages of seeing a new asset class being built by resourceful, smart, energetic, and motivated people. Yet the most widely held view is that bitcoin is a terrifying asset to own. In my view, it is the opposite.”
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