Bitcoin has had a rocky few months, to say the least. In 2 months between April 22, 2022, and June 22, 2022, the overall crypto market had lost $1 trillion of its overall valuation. As such, people are frantically searching “Bitcoin dead” on Google. Well, the short answer is – no. Let us tell you why.
Is Bitcoin dead in 2022?
On November 10, 2021 – Bitcoin reached an all-time high of ~$69,000. A crypto analyst named “Plan B” had created a stock-to-flow (S2F) model, which predicted that BTC would be $100,000 by the time 2021 ended.
Well, things didn’t turn out like that. The markets crashed shortly after. BTC is currently ~70% down from its all-time high. As such, it is totally justified as to why folks are scared and wondering whether the premier cryptocurrency is dead or not. In fact, as per the “Fear and Greed” index, the global sentiment for BTC is currently at “extreme fear.”
However, instead of panicking, let’s understand the context behind this crash.
Why is crypto crashing?
Prior to 2022, crypto was acting as a hedge against inflation since it was considered an alternative asset. However, with increased mainstream acceptance and regulations, the correlation between S&P 500 and crypto-assets is closer than ever.
Instead of being an alternative, crypto is being treated as any other tech stock. So, macro events affecting the general market are now affecting crypto as well. Speaking of which, we also happen to be going through unprecedented macro events. Namely – the ever-rising inflation levels and the Russia-Ukraine war. Additionally, there is the Terra, Celsius, and 3AC debacle that our CEO Justin Hartzman has covered here.
So, it is easy to dismiss Bitcoin as a “bubble” or a “scam” or declare it dead. However, the context behind the crash is just as important. Bitcoin is an asset – and all assets have dropped in the last few months.
Will crypto bounce back in 2022?
Short answer – we don’t know. We can’t speculate whether crypto is going to go back to previous heights or not. However, what we can do is look at the price history.
Image credit: coinmarketcap.com
In November 2013, BTC reached $1,000, before crashing and reaching $230 by September 2015. It was only in February 2017 that BTC reached the $1,000 level again. This recovery took a little over 3 years.
In December 2017, Bitcoin reached close to $20,000. This is when the ICO bubble burst, and we entered “crypto winter.” Over the next year, BTC dropped all the way to ~$3,200. The bulls then stepped back in, and we reached $20,000 towards the end of 2020. The rally continued, and we reached >$60,000 in March 2021. Then the market quickly crashed to sub-$30,000 in July 2021. We then reached an all-time high in November 2021, and the market crashed back to the levels we are at now.
So, what does this tell us?
- Bitcoin is volatile – no-brainer here.
- So far, Bitcoin has rebounded following crashes.
Now, we are not saying that we will recover following this latest crash. Maybe the rebound will happen years from now, or perhaps we will never reach these levels again – who knows.
However, we can conclude from Bitcoin’s historical price data that BTC has rebounded from crashes in the past.
Is Bitcoin a good investment?
Bitcoin still remains a powerful diversification asset for your portfolio. However, keep in mind to never invest more than you can afford to lose. Looking at the current market conditions, here is what a couple of experts had to say.
Jurrien Timmer – director of Fidelity:
“Is BTC cheaper than it looks? If we consider a simple “P/E” metric for BTC to be the price/network ratio, then that ratio is back to 2017 and 2013 levels, even though BTC itself is only back to late 2020 levels. Valuation often is more important than price.”
Rick Rieder, chief investment officer (CIO) of Blackrock:
“I still think bitcoin and crypto are durable assets. It’s a durable business, but there was so much excess built around it. It’s not terribly dissimilar from the internet bubble … if you go back to the ’99 and 2000, was the internet a bad idea? No, it wasn’t a bad idea. But you created so much excess around it and you just have to de-gear that dynamic, and I think we are seeing that today. Markets go down five times faster than they go up … That’s why you were seeing this incredible unwind. I think there’s a healthy recalibration going on. It’s a question of how much that recalibration is going to go.”
Will crypto be the future?
Vitalik Buterin, the co-founder of Ethereum, made a very valid statement recently. He believes that he doesn’t expect crypto to take over the world, but it will be a powerful alternative asset. Having a future where everything runs on crypto and replaces government-backed assets is a cypherpunk pipedream. Instead, it makes more sense to have crypto as an alternative asset that helps people where fiat has failed them. We have seen this with El Salvador and the Central African Republic adopting BTC as legal tender.
Speaking of El Salvador, president Nayib Bukele recently tweeted something about BTC, which ends this article on the perfect note:
“I see that some people are worried or anxious about the #Bitcoin market price. My advice: stop looking at the graph and enjoy life. If you invested in #BTC your investment is safe and its value will immensely grow after the bear market. Patience is the key.”