Key Takeaways
- Bitcoin was the very best performing asset class between 2011 and 2021, however the 12 months 2022 has introduced nothing however ache
- After rising 14X from its pandemic low in March 2020 to its all-time excessive in November 2021 of $68,739, Bitcoin has struggled amid risk-off setting
- Pullback has been so extreme that majority of the provision is in loss-making place
What a experience it has been for Bitcoin.
However as we shut the chapter that’s 2022, the social gathering has became a nightmare for many. Actually, most. As a result of the vast majority of the Bitcoin provide, which as I write that is 19.24 million bitcoins, is in a loss-making place.
I’ve written before about this pattern, and because the chart above exhibits, we’ve got seen higher than 50% of the provision in a loss-making place earlier than. However after a respite, the market has once more careened downward after a sure Mr Bankman-Fried was uncovered.
However it’s fairly the sobering statistic when contemplating that within the decade between 2011 and 2021, Bitcoin was the very best performing asset class on the planet. Exploding from fractions of a penny to close $69,000 final 12 months, it made lots of people very, very wealthy.
However for anyone who purchased in through the pandemic, the story is probably going very completely different. In extending out the above graph again over the course of the last decade, the ups and downs are evident.
Macro setting unprecedented for Bitcoin
The one factor that’s obvious is that for the primary time in Bitcoin’s historical past, it’s now experiencing a bear market within the wider economic system.
Launched in 2009, Bitcoin had, till 2022, loved one of many longest and most explosive bull markets in monetary historical past. Danger property throughout the board went sky-high, with the S&P 500 printing a 7X return from its low level amid the Nice Monetary Crash to its stage in the beginning of 2022.
“The scandals and idiosyncratic danger within the cryptocurrency house have been many this 12 months. Nonetheless, regardless of the torrid happenings within the crypto trade which have undoubtedly made issues lots worse, Bitcoin has plummeted as a result of wider macro setting, which has made a mockery of any thought that Bitcoin shouldn’t be a high-risk asset”, mentioned Max Coupland, director of CoinJournal, when assessing Bitcoin’s 2022 worth motion.
On this be aware, when plotting Bitcoin’s worth stage in opposition to the S&P 500, all appears to be like wholesome. Solely factor is, I minimize the chart off in the beginning of 2022.
The under chart then does the identical – plots the S&P 500 in opposition to Bitcoin. Solely this time, it focuses on 2022, exhibiting that each the inventory market and Bitcoin have plunged.
“Bitcoin is uncorrelated” narrative killed
After all, the narrative that Bitcoin is uncorrelated is totally useless. Not solely that, however the misguided considering that led some to conclude that Bitcoin is an inflation hedge has been confirmed silly.
There isn’t any different strategy to put it – Bitcoin has traded like a excessive danger asset.
Actually, it has traded like such a excessive danger asset that not solely was it the very best performing asset of the last decade between 2011 and 2021, when markets surged up and all these danger property printed meteoric positive aspects, however now that we’re experiencing the flipside, it has carried out worse than almost something.
It has pulled again so severely that these positive aspects which noticed it declare that greatest performing asset title are actually not sufficient to stop the truth that many of the provide is held by buyers in loss making positions.
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Analysis Methodology
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On-chain information sourced by way of Glassnode
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S&P 500 and Bitcoin worth information sourced by way of Yahoo Finance
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Bitcoin the “greatest performing asset class of 2011-2021” sourced by way of Yahoo Finance