At the height of the bull market, the rally to nearly $70,000 per bitcoin last year seemed like a huge rally. What a number!
What is a unit of anything that can be invested that is actually $70,000? Sure, Berkshire Hathaway Inc’s Class A stake is around $400,000. But what next? A barrel of oil is considered expensive when it is over $100.
But absolute numbers are deceptive because what comprises a single unit is completely arbitrary.
Without a stock split – where one share is arbitrarily divided to a certain number so that individual shares seem cheaper – the value of Apple Inc’s stock would be. Over $30,000 USD, compared to $130 USD currently.
Thus, it is more accurate to look not at absolute numbers, but at percentages. And through that lens, bitcoin hasn’t really been appreciated. During each market cycle, the peaks were actually lower.
This reflects significant forces roaming markets that have been more intense lately: Regulation Enforcement of this, although welcomed by some, changes encryption in a fundamental way.
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All this points to an inevitability: the days of wild price swings and huge gains are over.
In the bitcoin boom and bust cycles, there were three notable peaks: $1,000 in 2013, about $20,000 in 2017, and about $70,000 in 2021.
Each time, the rise in percentage terms was going down. The last peak was a little more than three times the one before it. But the $20,000 for 2017 was 20 times the 2013 peak.
And 2013? $1000, compared to prices before? Well, before that, the bitcoin markets were less well established than they are now, and it is difficult to determine the price objectively.
Those were the days when she was famous for exchanging 10,000 units for two pizzas. For all intents and purposes, bitcoin was practically At that time it is worthless. From that to its 2013 peak of $1,000—whatever a multiple it was, it was definitely more than 20 times.
This rally has been driven by ease of participation for both investors and those who create investment products.
Unlike any other financial instrument, Bitcoin, and the cryptocurrency world in which it was born, has never been paperless for anyone. You can meet someone from Craigslist, pay them cash and receive bitcoins on the smartphone app.
On the industry side, anyone can start their own coin or exchange platform. The infamously crumbling QuadrigCX platform was just one man on his laptop.
All this ease led to a wave of new money entering the cryptocurrency world, money that had not been in the markets before. In early 2022, a survey showed that 55 percent of bitcoin investors had started within the past year.
This won’t last much longer. And that’s not just because of the macroeconomic conditions of higher interest rates and more expensive borrowing.
The enforcement was unprecedented. The US government has imposed sanctions on some blockchain tokens, as the increasingly hard-line Department of Justice and the Securities and Exchange Commission have increased scrutiny of the industry.
The world’s largest trading platform, Binance, is under investigation by nearly every arm of the US government, with some in the industry speculating that its founder is avoiding the country due to fears of arrest (which he has denied).
Even the creators of the Bored Ape Yacht Club NFT (non-fungible token) set of digital photos are under investigation by the SEC.
On Monday, the Organization for Economic Co-operation and Development proposed new global rules on cryptocurrencies, and the European Union separately confirmed its new rules.
The European Commission is looking into data analysis on the Ethereum platform, which supports a large part of the crypto world. Such analysis has been big business for companies doing this – crypto activity is becoming more and more open and traceable.
In short, this is a reflection of the phenomenon that made the rise of the cryptocurrency so difficult in previous years. Under a growing regulatory yoke, crypto is being forced to become more like mainstream finance, with all the red tape associated with it.
This certainly does not mean that, in the near future, cryptocurrency price movements will become like mainstream finances or that we won’t see headlines again with much more. A number for one unit of bitcoin.
It’s just that those days are going to be fewer and farther, and the market will take longer to reach those big numbers.
This ridiculous ease with which people can invest in cryptocurrencies or create investment products is a thing of the past. And while cryptocurrency may be safer, less volatile, and more pleasing to the authorities as a result, it will also become more boring and less attractive to those seeking traditional mega-wins.
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