"Bitcoin is a bubble" is back!
Bitcoin hit $69,000 on 10 Nov, 2021. Since its all-time high, the cryptocurrency has fallen to $40500 (on 08 Jan 2022). That is a drop of 41.3%. A few more weeks and I think we may see a 50% drop in Bitcoin price from the ATH in November of 2021.
When I first bought Bitcoin at $19,500, ad drop this large seemed scary. I am sure many first-time buyers may have ended up buying Bitcoin above $65k thinking it will head to $100k soon. In case they decided to hold on to their Bitcoin, then the price of Bitcoin now must be hurting them. Moreover, if they go on to Bloomberg, then they will find out that people in traditional finance are warning everyone that Bitcoin investors are about to find out that Bitcoin is indeed a bubble. Ouch! To them, I say, "Don't worry, HODL" and look at the chart of Bitcoin since its inception.
In 2017-18, the price of Bitcoin dropped from $19,891 on 17 Dec 2017 to $5,873 on 06 Feb 2018. In fact, the price went to $10,400 on 22 Dec 2017. Bitcoin corrected 48% in 5 days! The correction extended to 70% in 1 month 21 days. The point is that correction was steep and brutal! Compare that to the correction now. 40% over 2 months. This is easily digestible.
A lot has changed from 2017 to now. Institutions are in and Cryptocurrencies are now highly correlated with financial markets. For Bitcoiners, Bitcoin is the ultimate hedge against loose central bank policy - People should buy it because it is a scarce asset that will go up in value as adoption increases. For the naysayers, its high price is a result of a loose central bank policy - It is going up because people are speculating on risky assets as plenty of liquidity is available. Both think that the ultimate reason for Bitcoin's growth is the same. So why are they arguing?
Many industry experts think that this time is the true test for Bitcoin. Is it a bubble? With the US Fed about to end its accommodative stance and institutions derisking their books, Bitcoin, according to them, is about to face its toughest test! Again, a 40% drop in 2 months versus a 48% drop in 5 days. It is easy to say that times have changed. Bitcoin has corrected a number of times in the past. This time it is no different. Yes, if some speculators go away with the withdrawal of liquidity from the markets, then so be it.
Loose monetary policy or not, the fact is that Bitcoin has gone up in price since its creation. During each cycle, the narrative around Bitcoin's growth changes (like it is central bank policy now) and I must say that Bitcoin may not have succeeded at anything but it has failed as a bubble every time it has been put to test. This time is no different!
Dear @karamyog
You're right on quite a few things in your post. A lot has changed since 2017. And indeed, crypto market is more and more correlated with traditional markets. And cycle is also less depending on halving.
I've heard that many times. Those who say that seem to be craving for dramma and more readers (emotions are easy to sell, especially if those are negative and fearful emotions).
Personally I don't see anything which would challenge Bitcoin network and make it go through "the true test".
Also I don't see FED changing much their stance. All they do is ... talk, talk and talk. Smoke and mirrors. If they were serious about reducing balance sheet and increasing rates, then they would do it already. Instead, they just announce that they will do it all in the future.
I think all they trying to do is simple: to cool down markets. Without crashing them.
Money printing will continue, even if it will be slower than before. Joe Biden and Jerome Powell do not seem to be willing to pull the plug. Those are both quite old people already and having huge crisis on their hands is something they will most likely avoid at all cost.
ps. maybe you will find my post worth your time and attention. It's related to recent bitcoin price movement and my view on it: https://steemit.com/hive-175254/@crypto.piotr/reason-for-bitcoin-massive-sell-off-learn-my-personal-opinion-and-share-your-view-and-earn-10k-sp-upvote-on-your-comment\
Cheers, Piotr
Sensational journalism. It is everywhere. I agree, this is not a challenge. Those who do not understand will make everything a challenge for Bitcoin.
You are bang on right about the Fed, in my opinion. Their talk is enough to bring some rationality to the markets. However, just talking will make their talk lose credibility so they will walk the talk this time, albeit not as much as they are suggesting. And you're right, no one wants to deal with the problems.. just push them for future governments.
Joe Baiden doesn't seem to care about his credibility. How many times did he make fool out of himself already? including pulling out from Afganistan?
He doesn't care about any of that. He only seem to care about leaving his own LEGACY.
And pushing US economy into crisis, right when they do not need to do it is not what I would expect. Especially since there isn't much social pressure.
They can simply kick can down the road.
One more thing worth remembering: Joe Baiden is a socialist. If he would support idea if stopping money printing, then where would he get funds for his social programs? Which he needs badly in order to maintain support of his voting base.
Well, he can manage most things using the press and most of the press is liberal. So pulling out of Afghanistan, will not be talked about much in the press. But that a disaster that has been.
Pushing the can argument is right. No one seems to care as the best thing to do is to kick the can. How will someone 20 years from now be able to pin the fault on someone? They have enough money to print. The real problem is money that is let out as credit in the markets. That only reaches a handful but the inflation from that affects everyone. Socialist programs at least target everyone.
It's a normal thing in the crpto space for us to experience the dip and drop and rise at times.
But the massive fall during this categories make people to be terrifying
Yes, even seasoned investors take notice of large drops so the fear or attention is real!
I think it always so in crypto market , there are times dip will call to dip but there is hope we just have to be patient as investors.
Patience is key.
will bitcoin fly like it used to be.
Don't know. Just know the volatility will reduce as adoption goes up.