- Bitcoin was the most effective performing asset class between 2011 and 2021, however the yr 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 surroundings
- 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 occasion has was a nightmare for many. Actually, most. As a result of nearly all of the Bitcoin provide, which as I write that is 19.24 million bitcoins, is in a loss-making place.
I’ve written earlier than about this development, and because the chart above reveals, we’ve seen larger 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 most effective performing asset class on this planet. Exploding from fractions of a penny to close $69,000 final yr, 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 surroundings 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 financial system.
Launched in 2009, Bitcoin had, till 2022, loved one of many longest and most explosive bull markets in monetary historical past. Threat belongings 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 degree in the beginning of 2022.
“The scandals and idiosyncratic threat within the cryptocurrency area have been many this yr. Nonetheless, regardless of the torrid happenings within the crypto trade which have undoubtedly made issues loads worse, Bitcoin has plummeted as a result of wider macro surroundings, which has made a mockery of any thought that Bitcoin shouldn’t be a high-risk asset”, stated Max Coupland, director of CoinJournal, when assessing Bitcoin’s 2022 value motion.
On this word, when plotting Bitcoin’s value degree in opposition to the S&P 500, all appears to be like wholesome. Solely factor is, I reduce 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
In fact, the narrative that Bitcoin is uncorrelated is totally useless. Not solely that, however the misguided pondering that led some to conclude that Bitcoin is an inflation hedge has been confirmed silly.
There isn’t any different solution to put it – Bitcoin has traded like a excessive threat asset.
The truth is, it has traded like such a excessive threat asset that not solely was it the most effective performing asset of the last decade between 2011 and 2021, when markets surged up and all these threat belongings printed meteoric features, however now that we’re experiencing the flipside, it has carried out worse than almost something.
It has pulled again so severely that these features which noticed it declare that finest performing asset title are actually not sufficient to stop the truth that a lot of the provide is held by buyers in loss making positions.
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On-chain information sourced through Glassnode
S&P 500 and Bitcoin value information sourced through Yahoo Finance
Bitcoin the “finest performing asset class of 2011-2021” sourced through Yahoo Finance