I didn't think 'Bitcoin is a bubble' remark will return this soon.

3 Min Read
500 words

image.png

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.

image.png

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!

Posted Using LeoFinance Beta