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Why Bitcoin's latest record-breaking rally is not as chaotic as 2017 boom

On a rolling 60-day basis, the swings in Bitcoin are generally smaller now than when Bitcoin was peaking in 2017.

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Bitcoin

Joanna Ossinger | Bloomberg 

bitcoin, cryptocurrency, digital
Part of the reason is that prices have steadily climbed for the last year, and the January selloff was orderly

Bitcoin’s record-breaking rally has come with some extreme moves, but by one measure, it’s not as chaotic as 2017.

For instance, on a rolling 60-day basis, the swings in are generally smaller now than when was peaking in 2017.

Part of the reason is that prices have steadily climbed for the last year, and the January selloff was orderly.

What makes the current run-up different than four years ago is a wider belief that will develop into mainstream asset class and the backing of big investors, such as Paul Tudor Jones and Stan Druckenmiller. Crypto proponents argue that volatility is bound to eventually decline as demand broadens from speculators to long-term buyers, citing Tesla Inc.’s $1.5 billion purchase as one example.

“Bitcoin is on a nascent journey to becoming an established asset class,” said Paolo Ardoino, chief technology officer at cryptocurrency exchange Bitfinex in London.

Bitcoin, the largest cryptocurrency, has more than quadrupled in the past year and is close to breaching $50,000 for the first time. The market is designed to have a fixed supply of 21 million coins, which has drawn comparisons with gold.

The token’s swings are picking up at the moment, but eventually the market will calm down, said Mike McGlone, a commodity strategist at Bloomberg Intelligence. “Tesla allocations are a key iteration of Bitcoin going mainstream, which will pressure volatility toward that of gold and potentially, eventually below,” he said.

To be sure, Bitcoin has a long way to go before it’s anything like gold and is currently more similar to highly volatile stocks like Tesla Inc.

“Any investor that is short-term focused and worried about volatility should probably avoid Bitcoin if he wants to avoid sleepless nights,” said PwC’s Hong Kong-based Global Crypto Leader Henri Arslanian.

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First Published: Mon, February 15 2021. 18:19 IST
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