The ascent of Bitcoin shock many as the rise from 6 cents in 2010 to highs of $19,343.04 in December 2017 was unprecedented in any asset class. The bulk of the move to the upside occurred in 2017 as the cryptocurrency began the year at under $1000, a lofty level considering its value just seven years before its flight into the stratosphere. As the price of Bitcoin appreciated, other digital currency instruments were born, and they followed the leader to the upside. The market capitalization of the burgeoning asset class rose to over $800 billion during the final month of last year and it looked like the $1 trillion mark was the first stop to even higher levels.
In the years leading up to 2017, Bitcoin had become a focal point for conversation, as price appreciation in any asset has a magnetic quality for market participants. While technological advances have changed the daily lives of people all over the planet, money and banking had not changed all that much since the introduction of the ATM which allowed people to get cash around the clock, seven days a week. While status quo financial institutions viewed Bitcoin and the other instruments as bubble markets, they embraced its child, Blockchain or distributed ledger technology. DLT or Blockchain is a decentralized, distributed and public digital ledger that records transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the collusion of the network. DLT or Blockchain has a myriad of applications across the world of banking and business around the world.
This year, gravity has hit the price of Bitcoin, and the price has declined dramatically. As of the start of June, Bitcoin was trading at less than half the price seen at the end of 2017.
As the chart shows, the price of Bitcoin was around the $7,618 level even though the price action in late 2017 raised the profile of the digital current asset class. The market cap of 1639 other cryptocurrencies, including Bitcoin, stood at just over $343 billion in late May, with Bitcoin holding a 38% market share of the asset class.
The title “cryptocurrency” denotes that the members of the asset class are means of exchange that transcend borders and are out of the reach of governments, central banks, and regulators around the world. Bitcoin and the other digital currencies are global instruments that facilitate the transfer of wealth or value from one party to another. The first regulatory agency to take the asset class series in the United States was the Commodities Futures Trading Commission who designated Bitcoin as a commodity rather than a currency. While gold is both a commodity and a means of exchange, it seemed that Bitcoin and the other cryptos fit into the regulatory designation.
The price decline from over $19,000 to the $7,600 level over the past six months has done little to deter the devotees of cryptocurrencies who insist that it is just a matter of time before they come storming back to higher heights. The image of Bitcoin has continued to rise even while its price has declined. Trading opportunities in Bitcoin will continue as market volatility is here to stay.