As 2017 came to a close, the Bitcoin narrative was a positive one. The price of a single coin topped out at $19,783[1] – an all-time high that excited long-time believers and caught the attention of skeptics. But the 2018 narrative has been decidedly darker. A December Bloomberg Opinion headline declared, “Yep, Bitcoin Was a Bubble. And It Popped.”[2] How, in the span of a single year, did the market move from intense Bitcoin optimism to near abandonment?
Is there actually a Bitcoin bubble?
In the aforementioned Bloomberg piece, writer Noah Smith points to Bitcoin’s dramatic drop as proof that the bubble burst in January. Just after peaking at a record-high value, the price of a single coin tumbled to below $10,000 by March. And currently, the price sits just above $3,000.
By definition, this appears to be a bubble. 2017 saw the rapid escalation in value; 2018 has seen a massive sell-off. It would seem the bubble criteria has been satisfied. But there are two arguments against this.
First, market volatility is the name of the game right now. Heavy sell-offs and falling value are not exclusive to Bitcoin. The ongoing trade dispute between the U.S. and China, in addition to chaotic Brexit negotiations in the UK and a changing of the guard in Germany, have all led to economic uncertainty around the globe. In early December, investor concerns led to a stock nosedive, with The Dow erasing much of its annual gains[3]. In response, many investors have begun to diversify their portfolios[4] to protect against the instability. The drop in Bitcoin value could be attributed, not to the burst of a bubble, but to the larger market trend.
And second, compared to Bitcoin’s original value, early adopters have still seen an incredible return on their initial investment. When the cryptocurrency first launched in early 2009[5], it was worth virtually nothing. The price of a single coin only permanently cleared $1,000 in March 2017. At its current price, it still holds more value than it has for the bulk of its existence. Thus, announcing Bitcoin’s demise seems a bit premature.
Looking forward
In late November, Allianz chief economic adviser Mohamed El-Erian[6] predicted cryptocurrencies would survive the current sell-off and remain a powerful commodity. As proof, he points to the number of major financial institutions that are getting involved with Bitcoin. For instance, in March, Barclays struck a deal with Coinbase to begin accepting Bitcoin payments in the UK. If the bubble had truly burst, major financial institutions would not be willing to take risks.
For individual investors, the talk of a cryptocurrency bubble can be worrisome. For long-term Bitcoin believers, the steep drop in value most likely seemed devastating. But Bitcoin has proved resilient time and time again, and it will continue to do so. During uncertain economic times, the best strategy is to protect your coins.
The most effective way to do this is to work with OTC Bitcoin escrow firms that ensure safe and secure transactions. At a time when the market is volatile, investors can’t risk making mistakes that put them at even higher risk of loss. Escrow My Bits offers investors four different ways to conduct transactions, inclusive of multi-signature options and pegging funds to exchange rates or fiat values. Bitrated offers smooth transactions, though it’s not compatible with multi-signature accounts. And, Anaiv Capital offers low fees (0.5%), a secure Escrow wallet, and an expert team with more than 30 years of traditional escrow experience. When it comes to safeguarding your funds during these uncertain times, choose a firm that offers peak security and meets all of your transaction needs.
Only time will tell, but history shows that Bitcoin will
survive. Instead of speculating about its
end, take steps to secure your coins for its future.
[1] Morris, David Z. (2017, December 17). Bitcoin Hits a New Record High, But Stops Short of $20,000. Retrieved from: fortune.com.
[2] Smith, Noah. (2018, December 11). Yep, Bitcoin Was a Bubble. And It Popped. Retrieved from: Bloomberg.com.
[3] (2018, December 4). US-China trade uncertainty fuels market plunge. Retrieved from: abcynews.com.
[4] (2018, December 13). Investors are ‘using a diversified portfolio’ amid market volatility. Retrieved from: finance.yahoo.com.
[5] History of bitcoin. Retrieved from: en.wikipedia.org.
[6] (2018, November 27). Cryptocurrencies to survive despite massive sell-off – Allianz’s El-Erian. Retrieved from: reuters.com.