Bitcoin has proven to be one of the most volatile traded products in history. Is it a currency? or is it a commodity? And more importantly, will institutional investors save this heavily traded product?
A this point many people do not care about how to define Bitcoin, as they now witness the third massive sell-off of this product in its short, 10-year life. In 2011, Bitcoin fell by 92 percent in one shockingly fast sell-off, while in 2015 it fell again by 84 percent. The current sell-off is now over 80 percent and by the looks of it, is still falling. But note that in dollar terms, this 2018 sell-off is its worst rout, as over $700 billion in market cap has been knocked off the cryptocurrency market in 2018.
In its short 10 year lifetime, Bitcoin has seen a shockingly volatile ride with the current breakdown taking this digital currency from $6,000 just 8 days ago, the under $3,500 today. Note that this is the first time it as traded below the $3,500 mark in 14 months. Today it has seen some buying in a short recovery to $3,900 but in our view, it will not hold as the decline from the near $20,000 high marked it down 81 percent as of yesterday.
After rallying about $1,000 in December 2013, Bitcoin dropped below $200 just two year later in 2015, dropping 84 percent in that violent 2 year period. And note that the amount of cash flowing through this product has dropped recently – and this is, from a technical standpoint, getting scary as volumes are key to confirming interest. At its peak, volume in Bitcoin was $49 billion in a 24-hour period. However, as of Monday, it was down to $19 billion. This clearly indicates that the number of people being knocked out of the market, those capitulating is increasing.
Here is the question worth asking. How much of the individual trading of Bitcoin will be replaced by institutional trading? If we know the answer to this question, we know the future of Bitcoin.