In December 2017, bitcoin hit a new all-time high of $20 000, having started the year at $950 – a 2,000% return for the year. A year later in December 2018, it was back to $3 500 and looked for all intents and purposes to be another speculative bubble for the economic textbooks.
“The bitcoin bubble has popped’ screamed headlines across the world. In fact, since 2010, bitcoin has been declared worthless over 411 times by major media news outlets. Yet for all its divisiveness, bitcoin has clocked a 210% compound annual growth for the last decade, making it the best performing asset over this period and the fastest asset ever to reach a $1 trillion market value. It did this in less than 12 years, where it took Microsoft 44 years to hit the $1 trillion market cap.
What’s different this time?
bitcoin recently broke through $63 000 in April 2021 and some believed it was time for a serious price correction. The price of bitcoin did pull back, but it didn’t quite play out like it did in previous bull cycles.
“There is something fundamentally and structurally different about the latest crypto bull run,” says Revix founder and CEO Sean Sanders. “Firstly, there’s a good case to be made that we’re not at the tail end of a bull market, but somewhere in the middle as we’re not seeing the kind of volatility that we have traditionally seen after a powerful move up in price. This is largely due to the rate of institutional adoption that is taking place. I would say we are at the early stages of institutional adoption, and this trend will almost certainly accelerate.”
Companies like MicroStrategy, Tesla, Stone Ridge and Square have led from the front by converting some of their US dollar treasury reserves into bitcoin as a way to hedge against expected deflation and depreciation in the value of the US dollar.
“In 2017, it was everyday people – known as retail investors – who were the driving force behind the price of bitcoin. And while they’re still a powerful factor in the current bull run, the arrival of large-scale institutional investors has been the game-changer for bitcoin,” says Sanders.
“Just two years ago, I was laughed at when I spoke about corporations buying bitcoin. Now it’s happening with $1 billion-plus purchases. Is it really that crazy to imagine a third world country adopting a cryptocurrency as their primary means of an exchange over their depreciated local currency? Or central banks adding bitcoin to their balance sheets just like they do with gold? I don’t think so and I believe this is where we’re headed.”
Weak employment numbers out of the US last week – with 266 000 new jobs created in April, well below the expected one million – reignited the bitcoin furnace and pushed its price to $59 000 from an April low of $48 000. The same worrying jobs report also put a fire under the prices of gold and silver. Inflation-hedge assets, or assets that can protect wealth when there’s…