Bitcoin held steady over the last week and is trading around $6,600 as I write this. I think bitcoin’s performance isn’t bad considering what’s happening to the world economy.
Still, a lot of people are probably frustrated that bitcoin isn’t doing better – especially considering the crazy actions that the Federal Reserve is taking.
So why isn’t Bitcoin holding up better as a store of value? Because it’s still speculative in nature. It is what I consider an emerging store of value. It’s not there yet.
Look at gold. It’s (arguably) the most well-established store of value on the planet. Yet even gold took a hit during the recent market sell-off. That’s because what we saw was a liquidation event. People were selling everything just to get into cash – or to meet a margin call.
Over the long run, all of this insane money printing and debt piling up will be what proves bitcoin and other cryptocurrencies are a necessary part of the monetary world. But the short term and even medium term continues to be very hard to predict. For what it’s worth, I remain bullish. And I’m not selling.
One strong factor working in bitcoin’s favor is that we are only 41 days out from the halving. After May 13, the amount of bitcoin coming on the market every day will be cut in half. I think the halving’s effect on the market will be impressive. And I still don’t think that effect has been priced into the current market.
If the COVID-19 pandemic hadn’t happened, I suspect bitcoin prices might have hit $15,000 by now. But we can’t worry about hypotheticals. COVID-19 did happen. And it’s going to cause quite a bit of pain across almost all markets over the medium term.
I believe this crisis will set off a financial “reboot” that otherwise might have taken five or 10 years. This reboot was always necessary to clear the debt and let the market’s invisible hand work. Ultimately, I believe this reboot will propel bitcoin, and eventually other quality cryptocurrencies, to the next level of mainstream adoption.
Keep holding,
Adam Sharp