In the pantheon of cryptocurrencies, Bitcoin is Zeus and Mount Olympus rules or retreats on Bitcoin’s death or life. With over 2000 cryptocurrencies listed on Coinmarketcap.com at a value in excess of 120 billion USD, ‘’Is Bitcoin dead’’ remains the question on many investors’ minds as the repercussions of bitcoins death will have far-reaching impacts on a sector of this size. Many skeptics point to the meteoric rise and fall of the Tulip mania overlaying charting patterns with ominous similarities. Traditional equity traders look at the Bitcoin percentage drop and snicker ‘’nothing comes back from an 80% decline, why didn’t you put your cash into a unit trust”. Media outlets splash headlines on the front pages, mainstream talk shows banter in all-knowing oracle esc tones ‘’Bitcoin is dead’’. But is it really?
In what can only be described as an absolute beating seen in 2018, we saw the Bitcoin price fall below the cost of mining of approximately 6000 USD. This meant that you can purchase a bitcoin on the open market cheaper than ‘’making’’ a Bitcoin through the mining process. This has forced a number of Bitcoin miners to close down or go into business rescue /chapter 11 or simply bankruptcy. If bearish sentiment were chocolate, this would be enough chocolate to rot your teeth in a single sitting.
From history, we can begin to understand cycles, adoption rates and in the case of bitcoin, resilience. In unpacking the doom and gloom objectively, cryptocurrencies market values have dropped from a high of approximately 800 Billion USD down to 120 billion USD. If it was dead, a year should be enough time to drop to 0, not 120 billion USD or even 1 billion USD. There are entire websites devoted to curating the number of times mainstream media has declared bitcoin dead.
For perspective have a look at the table below:
|Date||Comment||Source||Price of BTC (USD)|
|11/06/2011||“So, That’s the End of Bitcoin Then”||Forbes||>1|
|06/11/2013||“But make no mistake, Bitcoin is not the currency of the future. It has no intrinsic value.”||Business Insider||260|
|08/01/2014||“Bitcoin is not over yer. But the pseudo-currency is close enough to collapse to merit an early retrospective”||Reuters||801|
|15/01/2015||“The crux of the issue, the important point which should be made, is this: Bitcoin the currency may be dying”||Tlegraph.co.uk||217|
|19/01/2016||“It’s time to admit that the current Bitcoin needs to be scrapped”||Washington Post||386|
The self-regulating nature of the bitcoin network allows for a large loss of network computing as a result of the shutdowns/bankruptcies. As this hash power leaves the network, the coins itself become easier/ cheaper to mine and therefore become profitable again. This renewed sector profitability now attracts new miners.
Regulation remains a doubled edged sword. The negative aspect arises from individuals that would like to continue generating revenue with no tax implications, but these individuals will create a lot of sell pressure. The positives far outweigh the negative as regulation brings policy certainty, stakeholder accountability and most importantly, regulatory frameworks for institutional investors to enter and further formalize the crypto market.
The current drop in the market is quite severe, but it is not the worst and according to the data, it has rebounded from similar price declines. Take a gander at the top 5 biggest Bitcoin price declines of all time:
Even in its current dismal state, as at January 2019, Bitcoin has out-performed every single unit trust – even if we were to compare the 2 years to date performance of bitcoin against even 3 years of performance from aggressive, down to conservative and Sharia, geared units trusts.
Back to the question: is Bitcoin dead? No one can see the future with absolute certainty, but in the light of the historical analyses I would never count Bitcoin out. In the immortal words of Rocky Balboa, ‘’it doesn’t matter how hard you hit and keep moving forward, it matters how hard you can get hit and keep moving forward’’. From all the ‘’red in the above table, we can see that Bitcoin has been hit hard on several occasions, but it has kept moving forward.