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Bitcoin has been among the most fascinating tradable assets to keep an eye on during the last year. From the achievement of new high beams to the most recent fall to a minimum of one year, the cryptocurrency market has been nothing short of exciting in its attempt to characterize its volatile ebb and flow.
Between the growing chorus of enthusiasts, activists and investors demanding greater adoption – and more importantly, the launch of new financial instruments designed to give greater visibility to the new asset class – bitcoin prices have become a must for the market. While it is still difficult to define precisely the characterization of cryptocurrency and how it fits within the modern financial paradigm – whether it is a currency, a digital asset or a commodity – by evaluating price action in the context of its more consolidated analogues, it becomes clear that Bitcoin and its peers have achieved significant milestones.
By analyzing the characteristics of the rise of Bitcoin in tandem with raw materials such as gold and oil or technological stocks that have managed to survive in the latest technology bubble, it is easier to clarify the position of Bitcoin in the context of past performance and in what way they can be related to the prospects of the currency. Is the ride really unprecedented? Or is it that price performance is more a self-fulfilling prophecy that is destined to experience periods of accumulation, consolidation and distribution similar to rotation evident in other more established asset classes? We took a side-by-side look to see what types of clues can be collected in this historical price context and how Bitcoin accumulates when ranking the performance.
Digital gold
The fact that it has existed for 10 years – despite having attracted the regulators' rage, experimenting with different exchange hacks, and becoming a scalar stalemate – Bitcoin is a modern wonder. Many have likened to gold and even assigned Bitcoin the nickname of "digital gold" – and in some ways, this assessment is accurate.
Where gold and bitcoins are similar, there are the properties of scarcity and the inputs required for "mine" (the minting of new assets). They are uncontrolled by a single entity and extremely difficult to counterfeit. Their negative sides are also similar, with limited fungibility despite their generally accepted value and with both being used as safe havens during times of market uncertainty.
When comparing the Bitcoin and Gold charts (top and bottom), there are also similarities. For example, both activities were launched without having exchange-traded funds (ETFs), with Bitcoin still lacking one. The chart below shows the gold before the physically supported ETFs were introduced around 15 years ago.
Despite the different deadlines, there are significant similarities when comparing the pre-ETF chart of Bitcoin. It makes perfect sense as advances in modern technology accelerate the same graphical curves for Bitcoin, while the gold market matured over a series of decades. Furthermore, it suggests that a physically supported ETF contract would do the same for Bitcoin as it once was for gold. After the ETF Securities, the first gold-covered ETF, reached the market in March 2003 – and thereafter, with the introduction of the ETF GLD – prices rose to almost $ 1,600 from a minimum of $ 332. These developments have also improved the discovery of prices and liquidity for the gold market, inviting at the same time a more widespread retail participation.
A launch of the ETF could lead the next race to the Bitcoin bull, just as it once did in the gold. Currently, exposing its capital to BTC reminds you to invest in gold over the years & # 80 and & # 90; which favored specialists who knew how to get it and store it physically.
Because both are considered a safe haven, and in terms of volume of transactions, gold is gradually usurped by its digital counterpart, the correlation between these two assets may be more divergent in the future. Investors are increasingly choosing Bitcoins and crypts on gold in times of turbulence, and Bitcoin transaction volumes have recently passed gold for the first time. According to the London Bullion Market (LBMA), gold is expected to cancel $ 446 billion of OTC transactions settled during 2018 while Bitcoin has already recorded $ 850 billion in volume of transactions this year.
Is it possible to synchronize cryptography with technology titles?
Another potential source of cryptocurrency and Bitcoin could be the technology sector, and it could be an even better control group, given that their usefulness aligns well. Bitcoin currently accounts for just over 51 percent of the total cryptocurrency market capitalization. However, looking at a currency is like missing the forest for the trees, with a significant contribution from other new coins and solutions that have entered the fray, including ICOs.
Blockchain represents for companies what the Internet was in 1995 – a better way to reach consumers. The expectation that the Internet will accelerate the way business is done has seen companies bordering the Internet experience a price explosion that is now known as the dot-com bubble. Some mundane societies enjoyed picky stock prices just for launching a website, similar to how the new crypto startups suddenly found themselves managing eight-digit economies in late 2017. In both cases, excitement for the disruptive potential of the underlying technology has overshadowed individual use cases, but the subsequent incident has brought meritocracy back to the market.
The post-bubble break for technology titles did not mean that the Internet was a failure, it just meant that optimism and speculation went beyond innovation. Furthermore, it made room for exceptional technology companies to overcome noise. Amazon, for example, is one of the greatest success stories and performances of all time. Still, shares fell 95 percent during the dot-com boom up to $ 6.00 per share.
A portfolio with only $ 1,000 of Amazon shares purchased in September 2001 would be worth around $ 225,000 today.
The same story was also held for other former occupants of the trenches of actions such as Oracle, Adobe, SanDisk and others. The crackle of the crypt could help to separate the winners from the losers. The next time prices reach the previous levels, it may be behind companies that use the blockchain to provide tangible and real value. Does this mean that the whole market will increase? He did it for stocks. Just look at the NASDAQ-100 table below:
The crypt of the cause could generate the same interest and value as it once was, but this is not the question. Bitcoin – the unofficial market barometer – will reach its peak price just like NASDAQ did? This is inconclusive. Bitcoin has value individually, but it also works as a gateway to allow fiat to enter the larger cryptographic space. However, if in the future the blockchain will create fiat-compliant gateways and fundraising methods, the prices of Bitcoin and cryptocurrency could be split from the value provided by the blockchain. In this case, his chart could slowly shrink to zero as the power of the blockchain escapes the confines of its existing fundraising model.
Bitcoin the goods?
The formal definition of a commodity is a basic standardized good that is used in commerce and is interchangeable in terms of physical attributes. While, in principle, this is the notion underlying the raw materials market, there are still shades of gray in reality. Take crude oil, for example. Although there are two major contracts (West Texas Intermediate and Brent), there are more grades that vary depending on the position of extraction, density and other important differentiators. However, it is widely considered interchangeable despite these intrinsic subtleties.
In the context of interchangeability, Bitcoin certainly fits into the account of a commodity. Moreover, Bitcoin shares the distinction of mining when one compares how energy products are extracted, thanks to the process of unlocking new coins and adding new blocks to the blockchain. However, this is largely the point at which raw materials are compared, especially when considered in the context of demand and how it affects mining. While both oil and Bitcoin can be considered limited resources facing scarcity – both natural and artificial – oil suffers from depletion while Bitcoin does not address this constraint.
If nothing else, the only element linking these disparate raw materials are the conditions of the demand and the way it affects the price. Oil producers can increase or decrease production when prices rise or fall, with a decline in profitability when prices are low and the expansion of margins in periods of high prices.
Likewise, Bitcoin attracts more miners at a higher price than a lower price. The main element of differentiation is the difficulty with which each of these tasks is realized and with a higher degree of utility. Oil fuels the planet in one form or the other by providing power generation, while the cases of use for Bitcoin remain limited in terms of applicability (although they grow alongside the ecosystem). While one feeds the global economy, the other uses power to sustain itself as a way of transferring value to and between blockchain ideas. However, the report underlines the sensitivity of prices to demand and the way in which the fundamentals of the supply side change.
Looking strictly at a performance perspective, though, despite the more practical nature of oil (generating the electricity and power needed to move our modern economy), Bitcoin's long-term performance cast a shadow over oil prices during the last five years, when cryptocurrency trading has chosen on momentum and added more mainstream discourse. While the correlation coefficient shows a changing but generally positive relationship between the two instruments, it is all but coherent. During the period, the bitcoin with a price in US dollars increased by 250.33%, easily exceeding the 51.10% decline in oil prices over the same period.
While the perspective presents more questions than answers, the interpretation of these questions within a historical context sheds light on possible outcome scenarios, since both enthusiasts and investors evaluate the next steps for cryptography .
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