Bitcoin in a steady “recovery position” and certainly not dead

Bitcoin officially saw the light of day at the end of October 2008, and despite the success story written without a doubt since, the dinosaur among the cryptocurrencies most probably expected its tenth birthday to turn out slightly differently – particularly given the euphoria that arose in the second half of last year. Starting at just short of USD 20,000 in mid-December 2017, the Bitcoin price had slumped by the end of June to its low for the year thus far of just below USD 5,800. To date, 2018 has essentially been a disappointment not just for Bitcoin, but for the entire segment.

There are several reasons for the way the quotations for Bitcoin & Co. sagged. First of all, the expectation that cryptocurrencies were about to win out compared to traditional currency that flared up for a while were probably exaggerated. The same applies to the hope that established investors and finance houses would enter the segment in a big way. Added to which, current financial market conditions, defined as they are by various sources of global disquiet and a Fed monetary policy that is becoming more restrictive, are not making things particularly easy for cryptocurrencies.

For passionate advocates of cryptocurrencies, these trends are not a reason to change their stance. They point out that Bitcoin has, since its inception, already undergone several such drastic ups-and-downs without them leading to the death of the cryptocurrency. Indeed, they argue, in later cycles the previous all-time highs were easily surpassed. According to this argument, Bitcoin will emerge from the present crisis all the stronger, so the prevailing assessment among its supporters.

What speaks in the cryptocurrency optimists’ favour is that the Bitcoin price has by and large held steady above the USD 6,000 mark since the summer. Moreover, its volatility (a central point of criticism among the sceptics) has decreased considerably. In November the historical one-month volatility was actually below that of the leading US index, the S&P 500, a very rare occurrence. And it is by no means the case that Bitcoin is no longer being traded. Rather, the volume of daily transactions in recent months has risen appreciably and on 12 November for the first time this year passed the 300,000 mark (by comparison: in April the figure was in part below 150,000). The transaction volume was on a comparable scale for large parts of 2017.

Summary

Even after the experience of the last 12 months, supporters and critics of cryptocurrencies are still at loggerheads. While opponents of cryptocurrencies believe the price losses since the beginning of this year mark the beginning of the end, the advocates argue that this is merely a further phase of consolidation from which, sooner or later, the next upward movement will take off. What can be said is that while media attention has considerably dwindled, cryptocurrencies continue to be traded on a noteworthy scale. There is therefore no cause to sing a dirge on Bitcoin & Co. In our opinion, what is still lacking are meaningful applications for cryptocurrencies in everyday life that would justify clear increases in value in the long term.

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