When gauging markets, it is essential not to leave anything out. Lights should be pointed at the market instrument from all angles, not to overlook anything in the dark. Commonly, that is fundamentals and technicals, but we wouldn’t stop at those. In bitcoin’s case, much more is at play that needs to be considered.
Precious metals that carry valuable historical data are representative of safe havens in challenging times. They reflect human emotions like fear and greed. Holding something physical, shiny, heavy, and rare in one’s hands provides comfort. Yet, it is said that nothing is more powerful than an idea whose time has come. The decentralized idea behind Bitcoin, a true game-changer, provides many solutions for the problems of our time.
We find ourselves ensued in various battles. Environmentally, economically, and from a human perspective. As much as it is questionable if coal and oil, centralized money, and wars (attacks on ourselves) hold a prosperous future, change is typically avoided. There have been moments in history where rapid change happened. Most often introduced by a charismatic human being with a compelling principle at a defining moment when a change was needed.
S&P 500 Index versus BTC in US-Dollar, Monthly Chart
The Bitcoin idea was born as a response to the crash of 2008. In its principles, diametrical to fiat currencies. Bitcoin is decentralized, limited, deflationary and digital. There is no historical event where increased money printing has resolved economic turmoil. And yet, we have not come up with a better solution, or at least we have not implemented it yet.
The chart above shows how shortly after the crash of 2008, the first transaction ever sent on the Bitcoin blockchain was completed in January 2009.
Coincidence? It took some time until the cryptocurrency’s pseudonymous creator Satoshi Nakamoto found traction with his idea reflected in Bitcoin’s price rise. Still, it has not just caught up but outperformed the market by a stunning margin.
BTC in US-Dollar, Monthly Chart
Covid provided like a steroid a means to illustrate many shortcomings in a magnified way. The chart above shows that Bitcoin speculation was an answer to where many find a more prosperous future compared to precious metals.
In addition to fundamentals and technical, the underlying idea and hope for a transitory future got traction when people were most afraid.
BTC in US-Dollar, Monthly Chart
Dissecting markets like this in all their shades and facets is necessary for discovering underlying currents, motivation, and sustainability of trends. In Bitcoin's case, the found strength of application, beliefs, and principles inherent in Bitcoin itself and its traders allows for sitting more easily through its volatility swings. Once the mind grasps reason, it tolerates easier, otherwise hardships to trade a volatile vehicle like Bitcoin. With a battle ensured on this magnitude and for an expected long duration, one can accept deep retracements in a more tranquil fashion.
The monthly chart above shows that bitcoin might face one of those quick dips that holders accept, knowing that the battle isn’t over yet.
Conclusion
Mills are grinding slowly. Change typically takes time, and those holding the reign over financial power will certainly not surrender such summoned energies lightly. While this world certainly needs a more adaptive behavior of humanity both for its wellbeing and the planet itself, it is unlikely that a shift, if at all, will be swift. This means that bitcoin is a continued struggle to establish itself. And this will result in continued high volatility for the years to come. As such, it will remain an excellent opportunity for the individual investor.