Rising to around $70,000 per bitcoin over the previous year seemed like a significant jump at the height of the bull market. What amount!
However, absolute numbers are misleading because it is completely arbitrary to define what counts as a single entity.
What investment unit is exactly equal to $70,000? Yes, a Class A share of Berkshire Hathaway Inc. costs about $400,000. What else then? If a barrel of oil costs more than $100, it is considered expensive.
A share of Apple Inc. would be worth more than $30,000, up from $130 today, had stock splits, which arbitrarily split a share by a set number to make individual shares look cheaper, not have occurred.
That reflects important market factors that, while generally welcome, have recently become more pronounced: regulation and enforcement, which is fundamentally altering cryptocurrency.
As a result, looking at percentages rather than exact numbers is more accurate. In light of that, bitcoin hasn’t really risen that much. In each market cycle, the waves have actually been smaller.
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All of this indicates that the days of continual dramatic price swings and huge profits are inevitable.
In bitcoin’s boom and bust cycles, there have been three main peaks: $1,000 in 2013, nearly $20,000 in 2017, and around $70,000 in 2021. The rally has tapered off in percentage terms each time. Only a little more than three times higher than the previous peak was the last one. However, the $20,000 in 2017 was 20 times the 2013 peak.
What about the $1,000 in 2013 compared to previous prices? Well, prior to that, the bitcoin markets were considerably less developed than they are now, making target pricing difficult. The standard exchange rate at the time was 10,000 units for two pizzas. At the time, Bitcoin was essentially useless. Whatever the multiple was from then until its peak of $1,000 in 2013, it was undoubtedly more than 20 times.
The simplicity of participation for investors and those who create investment products was what drove this boom. Unlike traditional financial instruments, neither Bitcoin nor the cryptocurrency industry that spawned it required any paperwork for users. Through a smartphone app, you can meet someone from Craigslist, give them cash, and receive bitcoins in return.
Anyone could launch their own cryptocurrency or exchange platform on the trading side. It was well known that the QuadrigCX exchange was just a man using a laptop. An avalanche of fresh money that had not been in the markets before flooded the realm of cryptocurrencies as a result of all this ease. In early 2022, a survey revealed that 55% of Bitcoin investors had recently started using it.
There isn’t much time left for this. And it is not only because of the tighter credit restrictions caused by the macroeconomic environment of higher interest rates. It had never been applied before. As the Department of Justice and a stricter Securities and Exchange Commission increase their investigation of the sector, the US government has imposed sanctions on various blockchain programs.
- The days of huge cryptocurrency gains are passing as Bitcoin gets monotonous
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