Key Takeaways
- Bitcoin was the greatest performing asset class between 2011 and 2021, however the 12 months 2022 has introduced nothing however ache
- After rising 14X from its pandemic low in March 2020 to its all-time excessive in November 2021 of $68,739, Bitcoin has struggled amid risk-off surroundings
- Pullback has been so extreme that majority of the supply is in loss-making place
What a experience it has been for Bitcoin.
But as we shut the chapter that is 2022, the get together has become a nightmare for many. Literally, most. Because the majority of the Bitcoin supply, which as I write this is 19.24 million bitcoins, is in a loss-making place.
I’ve written before about this pattern, and as the chart above exhibits, we now have seen higher than 50% of the supply in a loss-making place earlier than. But after a respite, the market has once more careened downward after a sure Mr Bankman-Fried was uncovered.
But it is fairly the sobering statistic when contemplating that in the decade between 2011 and 2021, Bitcoin was the greatest performing asset class in the world. Exploding from fractions of a penny to close $69,000 final 12 months, it made loads of individuals very, very wealthy.
But for anyone who purchased in throughout the pandemic, the story is probably very totally different. In extending out the above graph again over the course of the decade, the ups and downs are evident.
Macro surroundings unprecedented for Bitcoin
The one factor that is evident is that for the first time in Bitcoin’s historical past, it is now experiencing a bear market in the wider economic system.
Launched in 2009, Bitcoin had, till 2022, loved one of the longest and most explosive bull markets in monetary historical past. Risk property throughout the board went sky-high, with the S&P 500 printing a 7X return from its low level amid the Great Financial Crash to its degree at the begin of 2022.
“The scandals and idiosyncratic risk in the cryptocurrency space have been many this year. Nonetheless, despite the torrid happenings in the crypto industry which have undoubtedly made things a lot worse, Bitcoin has plummeted due to the wider macro environment, which has made a mockery of any thought that Bitcoin is not a high-risk asset”, stated Max Coupland, director of CoinJournal, when assessing Bitcoin’s 2022 value motion.
On this notice, when plotting Bitcoin’s value degree towards the S&P 500, all seems to be wholesome. Only factor is, I reduce the chart off at the begin of 2022.
The under chart then does the similar – plots the S&P 500 towards Bitcoin. Only this time, it focuses on 2022, exhibiting that each the inventory market and Bitcoin have plunged.
“Bitcoin is uncorrelated” narrative killed
Of course, the narrative that Bitcoin is uncorrelated is utterly useless. Not solely that, however the misguided pondering that led some to conclude that Bitcoin is an inflation hedge has been confirmed silly.
There is no different strategy to put it – Bitcoin has traded like a excessive threat asset.
In truth, it has traded like such a excessive threat asset that not solely was it the greatest performing asset of the decade between 2011 and 2021, when markets surged up and all these threat property printed meteoric features, however now that we’re experiencing the flipside, it has carried out worse than almost something.
It has pulled again so severely that these features which noticed it declare that greatest performing asset title are now not sufficient to stop the truth that the majority of the supply is held by buyers in loss making positions.
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Research Methodology
On-chain information sourced through Glassnode
S&P 500 and Bitcoin value information sourced through Yahoo Finance
Bitcoin the “best performing asset class of 2011-2021” sourced through Yahoo Finance
