- Bitcoin falls substantially in 2018.
- Regulatory & scrutiny suppress price.
- Bitcoin recovers remarkably, +216% YTD.
Bitcoin has been in the news frequently in 2019 as its showed much promise. The emerging asset class came off a brutal year in 2018 and some called it the end to Bitcoins future. With the Bitcoin community being so large, this price action did not faze many people who still believed in the long-term value of Bitcoin. Industry followers and enthusiasts continued to label Bitcoin as “undervalued” and price deflating due to short-term news developments and uncertainties. In less than a year, Bitcoin fell from $19,783 in December 2017 to $5,500 in November 2018. After much scrutiny, Bitcoin was able to recover in what some are calling the “strongest recovery in market history.” The sell-off last year was hard to swallow, but many who were “dollar cost averaging” on the way down have done extremely well this year. Some of the developments that pushed down Bitcoin were:
- December 17th 2017, Bitcoin rallies and tops it’s all time high of $19,783
- December 22nd 2017, Bitcoin quickly loses gains, retracing 45% to $11,000
- January 2018, Bitcoin falls another 12% due to Japan potentially “banning crypto trading” & BitConnect shutting down its crypto exchange due to receiving cease and desist orders.
- January 2018, Japan’s largest crypto OTC company Coincheck gets hacked for $530 million which causes uncertainties on market security in crypto
- February 2018, due to the events above, Bitcoin continued to struggle, falling another 50% to $6,000 levels.
- March 2018, Binance was breached within its API structure, which was significant as Binance is one of the most reputable exchanges in cryptocurrency
- March 2018, major social media companies such as Facebook and Google were banning advertisements for crypto related activities
- November 2018, due to all these negative developments, Bitcoin tanked below $100 billion market cap and fell further to $5,500 levels.
Negative News Dies Down in 2019
After the markets digested all the negative news in 2018, Bitcoin continued to move forward after some of these issues were addressed. Bitcoin year to date is +216% and recently surpassed $11,500 levels. The markets started to see some of the issues above being addressed. Binance was able to quickly recover from its breach and even had sufficient capital to support the breach. Social media giants were downplaying crypto in 2018, but 2019 outlook has changed drastically. Not only has Jack Dorsey ( Twitter CEO ) talked about his long-term interest in Bitcoin, Facebook has introduced its massive plans to enter crypto with Libra. With the price action in 2019, one would argue the sentiment has completely changed hands since 2018s downward momentum.
Bitcoin Vs The World in 2019
Year to date, Bitcoin is taking down some of the largest companies in the world. With Bitcoin posting a +216% return year to date, it’s hard for any company to see this type of return regardless of earning reports. Below we have displayed a chart from Koyfin showing Bitcoin stacking up against the largest companies year to date. With many hedge funds and other FIs favoring the tech sector in 2019, some of the tech favorites have had an average year so far. Amazon and Google for example are having solid years, but they are only outperforming the overall markets slightly. Obviously Bitcoin is still volatile, but you can’t discount the returns the asset class has seen since inception.
Bitcoin Future Projections
With the returns Bitcoin is witnessing and the uncorrelated market structure, many still see a large upside. In a recent market report by Visionary Financial, we argued that Bitcoin was still in undervalued territories. We took a look at various fundamental metrics to support our arguments. With Bitcoin price holding strong during traditional market uncertainties, it will be interesting to see if adoption levels increase. Up until this point, you could argue most of the investing has come from retail investors. Financial institutions haven’t been involved due to regulatory and custodial issues. FIs are not going to allocate capital to this asset class until they believe its safe to do so for clients. Some of the major developments coming to fruition are BAKKT and Fidelity Digital. Both platforms are offering framework for financial firms to get involved. Both projects have been in development for a long time and are due to roll out very soon. This is when the Crypto & Bitcoin space will get interesting. If FIs started deploying capital into a fixed supply asset (Bitcoin), you could argue much more upside could be in store.