The Significant Price Drop of Bitcoin
Bitcoin’s price has dropped significantly from $49,000 to below $39,000 following the approval of an ETF. This brings the question of Bitcoin’s volatility given the drastic price change.
The Stability and Nature of Bitcoin
Bitcoin itself is inherently stable contrary to its price behavior. It lacks the typical attributes that contribute to volatility making it one of the least internally volatile assets. Its stability is compared to that of a physical bearer asset like gold as it possesses no counterparty risk. Its production of blocks is consistent, occurring every 10 minutes, irrespective of its dollar price or the number of miners on the network, retaining its key characteristics.
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The Reasons Behind Bitcoin’s Price Volatility
Bitcoin’s price volatility is attributed to human behavior rather than the asset. The majority of the world’s capital is still grappling with how to value Bitcoin accurately. This cycle of rapid growth and correction is the primary cause of Bitcoin’s intense volatility.
Bitcoin’s Long-term Trend and Growth Rate
Despite its volatility, Bitcoin’s long-term trend is significantly upward owing to its inherent qualities as a superior form of money. Its compound annual growth rate of 141% over the past 13 years is described as exceptionally high.
Hot Take
At the time of writing, Bitcoin is trading at around $39,906, up 0.23% in the past 24-hour period. The discussion regarding the January 11th debut of eleven SEC-sanctioned spot Bitcoin ETFs, including a prominent one from BlackRock showed the interplay between conventional financial systems and the emerging cryptocurrency sector.
