One of the impacts of COVID-19 has been people at home, receiving some pay, and then getting interested in cryptocurrencies. Bitcoin has once again grabbed the headlines with enormous gains and losses being made over the last few months. So, let’s take a look at Bitcoin over a larger timeframe.

Its price swings are wild

Bitcoin more than doubled in the first half of the year, then hitting a high just shy of $65,000 in April. In the month of May BTC fell around 35%. Since then BTC has fallen around a total of 50% from April’s heights and currently trades around $33,000.

Lesson number 1: If you are going to trade Bitcoin be prepared to endure large price swings, so use wide stops and no leverage.

Lesson number 2: Bitcoin works as an inflation hedge, but remember gold is the go-to inflation hedge. According to JP Morgan analyst, Nikolaos Panigirtzoglou ‘demand for Bitcoin is price sensitive’. Some institutional investors started getting out of Bitcoin in April. They thought Bitcoin prices were too high relative to gold’. See here for the one post you need to trade gold.

Its future depends on adoption

The recent dip under $30,000 came as China cracked down on crypto mining and told financial institutions to not facilitate the crypto payments. Govt’s are understandably wanting to shield their citizens from the volatility and scam attracting nature of BTC. The UK’s FCA, for instance, has banned the sale of crypto-derivatives citing things like extreme volatility, the prevalence of market abuse, the difficulty for retail consumers to understand cryptos, and lack of legitimate investment needs.

In contrast, countries like El Salvador passed a law to adopt Bitcoin as legal tender. The future of Bitcoin depends on adoption. The day you can walk into a shop and buy your groceries in Bitcoin is the day that Bitcoin can enjoy some kind of sense of longer-term security.

Bitcoin lifted a lot of boats

When Bitcoin’s win, alternatives to Bitcoin’s win too.

Bitcoin is the poster boy for cryptocurrencies and its rise catapulted other coins higher on an even greater trajectory. Ethererum has roughly trebled this year and Ripple gained a similar amount. Dogecoin apparently started as a joke in 2013, rose over 5000% this year.

What does this tell you?

It tells us that traditional finance has not been serving some people very well. They are hungry for change. It is easy to write this off as ‘crypto nuts’, but there is a real cry here from people. A transformation is underway accelerated by two things:

  • intensification of digitalisation brought about by,
  • lots of spare time and spare money has shown that desire for change expressed in BTC prices.

Of course, not all revolutions succeed and the crypto / De-Fi revolution needs further adoption. So, If you invest in the crypto markets just make sure you always know how much you are risking at any one time. Don’t try to be the hero that ends up potentially getting zero.