After reaching its all-time high of $65,000, the forebearer coin was hammered to size down to around $35,000. Basically, all the money you made in 2021 vanished within the space of a few weeks and no, you weren’t hacked.
Such a halving in price has many investors and fund managers either twiddling their thumbs or scrambling to diversify. With bitcoin’s frailties out in the open despite a strong first quarter of the year, we have to pose the question; was bitcoin dying or just sick? Now of course, the price dropped then rose well over $44,000 again the fell again so there is something to be said for HODLing.
Financial education has never been as popular as it is right now, with the pandemic changing how everyone looks at money. Bitcoin has been touted by many, including myself, as a decent investment, that stance has been challenged loudly and resolutely by the events of the last few months.
So if you are a bitcoin nut, here are five things that should concern you going forward.
1. Many men wish death upon bitcoin
I have christened bitcoin as the 50 Cent of the financial world at the moment. If you’re lost, the rapper 50 cent made a brand for himself by telling stories about how he got shot nine times right when he was about to blow. Bitcoin, just like 50 got shot several times right when it was about to blow. I strongly believe we would have been at $90,000 by now if BTC didn’t have so many haters.
Haters come in the form of regulators who are scratching their heads on how to deal with it. The Biden administration which came to power with so much aplomb has old school people like Janet Yellen running the treasury. We know how much that lady loves satoshis now, don’t we?
The next haters in line are central banks. These institutions have proven themselves almost incapable of seeing bitcoin as anything short of an enemy. Let’s not get into Elon Musk and China, that’s an e-book’ worth of content.
With BTC being targeted so many times by different shooters, the price dip was only a matter of time. The thing about being hot and popular then getting shot is, you could end up dying or live to tell the story like 50 Cent did in his record Many Men.
2. China! China! China!
Ok, let’s chat briefly about China. China is one of Bitcoin’s shooters but carries more of a potent threat than all the others. The Chinese government appears to be on a purge mission when it comes to bitcoin. Chinese bank officials appear to have sat down for a little anti-bitcoin chat and the Chinese government doesn’t take no for an answer.
China is a bad enemy for bitcoin to have. Chinese and other Asian investors are very important for any global asset. Their sheer numbers and the beautiful Asian culture of investing (and gambling), is pivotal if big gains are to be made. Bitcoin has been in a price valuation bubble mainly because of Asian investors, most of them from China. With them leaving the fray, bitcoin is beginning to look a little naked. Why China hates bitcoin is a whole different article, what matters is that they don’t like it. That counts for a lot if you have Satoshis as a big part of your portfolio.
3. Institutional flight
Institutions are not like your average retail investor; institutional investing is executed by fund managers that have to protect and grow institutional capital for clients.The proverbial guillotine is always in sight for fund managers that expose institutional capital to too much of a downside. With Bitcoin’s status as a safe haven for value increasingly being challenged, fund managers are scrambling to reallocate resources. The recent BTC attacks caused institutional flight, with fund managers reverting to assets they know better such as gold.
There aren’t that many Cathy Woods’ out there prepared to hold on to crypto investments for the long run. If indeed the smart money is racing out the door, all you’ll have is retail investors engaging in momentum trading. Not very good. There is a lot of evidence that shows that in fact institutional investment has been flowing into cryptos, but lets keep an eye on them.
4. US Government may follow China’s footsteps
The relationship between the American and Chinese governments is the biggest frenemy story in recorded history. Though they trade a lot, they agree on very little and we are all used to seeing little spats between them. One troubling thing they seem to agree on is “Bitcoin is not good”. We’ve seen reports from as far back as May that indicate a desire by the US government to reign in on Bitcoin. US financial authorities cite concerns over a lack of oversight as the reason for the potential crackdown.
The Bitcoin hodler community is full of warriors that swear nothing is going to happen to bitcoin. I would love to hang on to their every word, but one thing I do know is that the people with the guns make all the rules. Governments in this case are the gun holders and it could be a gamble of the century to bet against them. We all have to hang on a prayer on this one.
5. Bitcoin’s lack of evolution
I am going to write these next few lines like it’s the year 2000 and the internet is about to blow up. Myspace is hot and AOL “You’ve got mail” is going to dominate for decades. Reggae star Shaggy is also screaming “it wasn’t him” and beepers are the thing of the day.
Fast forward a few years later, everyone has a cellphone, Google and YouTube are super hot and none of these Gen Z kids has ever heard of Myspace. Also, no one has a flip phone anymore and Shaggy is now a family man.
My point is, things can change very fast within a few short years. If Bitcoin doesn’t evolve into a faster payments network and develop more use cases, then it could be curtains. Altcoins like Ethereum are surpassing BTC in terms of use cases and that could count for a lot in the future. We may not be sure about Bitcoin as a store of value but we see the extensive use cases of Ethereum, Stellar and other networks. Bitcoin may need an upgrade to stay relevant because relying on its first-mover advantage may not be sustainable.
Bottom line
Bitcoin has a lot of things going against it at the moment. This does not mean that it’s dead in the water though. It could either end up succumbing to all the inflicted trauma or it could end up like 50 Cent and live to tell the tale. If you are investing in Satoshis, tread with caution and I wish us all the best.
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