avatarCarlos Velásquez

Summary

The article discusses the five instances when Bitcoin was presumed dead due to significant price drops, yet it continued to resurge due to global financial instability and its role as a store of value in developing economies.

Abstract

The article "The 5 Times Bitcoin Died" explores the resilience of Bitcoin despite severe price declines that, at various points, led to its premature obituaries in the media. It highlights how Bitcoin, with its decentralized protocol and fixed supply, has appealed to early adopters and those in countries with underdeveloped financial systems or high inflation. The piece underscores Bitcoin's ability to rebound from extreme volatility, including an 87% price drop from November 2013 to January 2016 and a 99.9% drop in 2011 after a significant hack on Mt. Gox. It also touches on Bitcoin's role during economic crises, such as in Europe in 2013 and the global pandemic in 2020, and how it has been perceived both as a speculative asset and a digital gold. The author concludes that despite repeated "deaths" and market corrections, Bitcoin has consistently re-emerged stronger, suggesting that its protocol is antifragile and well-suited to withstand financial stressors.

Opinions

  • Western media often overlooks Bitcoin's utility in developing countries, focusing instead on its investment potential for those in stable economies.
  • Bitcoin's value is more apparent when considering its use by individuals in nations with financial instability, inflation, or limited access to traditional banking.
  • The article suggests that Bitcoin's price volatility and resilience are indicative of its underlying strength and potential for mainstream adoption.
  • The author implies that Bitcoin's repeated recoveries from severe price drops are a testament to its robustness and the trust placed in it by investors, especially those who have held it through turbulent times.
  • By omitting the 2013-2016 price drop from the list of Bitcoin's "deaths," the author indicates that this particular event was part of a longer-term market adjustment rather than a singular catastrophic event.
  • The reference to Nietzsche's quote about hardship building strength aligns with the author's view that Bitcoin's endurance of market challenges has made it more resilient over time.
  • The author posits that despite frequent declarations of its demise, Bitcoin's history of recovery and growth suggests it will continue to be a significant player in the financial world.

The 5 Times Bitcoin Died

Global financial instability keeps resuscitating Bitcoin’s narrative

Photo by Karolina Grabowska: Pexels

Western media with an axe to grind assess Bitcoin mainly from the perspective of an investor living in a developed country where alternative financial and monetary systems are largely unnecessary. In this context, they paint Bitcoin as just another speculative asset; at worst, the less informed refer to Bitcoin as a Ponzi scheme.

A more nuanced understanding of the value of Bitcoin requires pundits to put themselves in the shoes of less fortunate economic actors around the globe to realize the following: where financial systems are less developed (such as much of Africa), prone to high inflation (Argentina), or unavailable to large segments of society (Vietnam), Bitcoin continues to fulfil its store-of-value function. From a developing world perspective, it’s easier to understand that as long as political and financial instability persists, Bitcoin’s resurgence from the dead should continue.

The 5 Times Bitcoin Died

*This article omits BTC’s November 2013 to January 2016 87% price drop as it was part of a multiyear downtrend caused by several factors: China’s first Bitcoin ban and Mt. Gox’s 2014 hack, ensuing regulatory troubles and eventual bankruptcy.

Bitcoin’s 1st Death: 2011 (99.9% price drop)

In 2011 Bitcoin’s decentralized protocol, anonymity, and fixed monetary supply appealed to its 30,000 or so early adopters. That year, the price of BTC popped from $1 to $32, then crashed to $0.01 when hackers took control of bitcoins on Mt. Gox and dumped them. Publications such as Wire wasted little time before writing Bitcoin-related articles that read like obituaries.

Bitcoin’s 2nd Death: Early 2013 (81% price drop)

In 2013 Bitcoin began attracting mainstream media coverage as interest in Bitcoin grew in Silicon Valley (this was a period when some Greeks and Spaniards began transacting in bitcoins to forgo local foreign exchange rules). With Europe’s ongoing sovereign debt crisis as a backdrop, BTC’s price climbed to $266 in April 2013 but fell to $50 when a second Mt. Gox mishap occurred. Bitcoin detractors again began calling it a tulip bubble.

Bitcoin’s 3rd Death: 2017–2018 (84% price drop)

On December 17, 2017, BTC climbed to a new all-time high of $20,089. But despite a lack of significant events, a gruelling 14-month BTC price downtrend ensued before bottoming at $3,191. The duration of the market correction caused many would-be investors to lose interest in Bitcoin. Some began investing in other cryptocurrencies, such as Ripple and Ethereum.

Bitcoin's 4th Death: 2020 (55% price drop)

In March 2020, financial markets were down due to the global lockdowns and the economic unknowns of the pandemic. BTC’s price fell over 50% within a few days as investors sold bitcoins to access liquidity, driving the BTC price from $9,032 to $4,107. Naysayers noted Bitcoin was not a good store of value after all; by late 2020, BTC had reached another new all-time high north of $30k.

Bitcoin’s 5th Death: 2021–2022 (77% price drop)

In 2021 BTC’s price surged to an all-time high of $68,789 with the help of global economic stimulus measures and low-interest rates. But the inflationary economic backdrop of 2022 led to a risk-off environment. BTC’s price dropped below $20k even before the FTX investigation; it declined to a 52-week low of $15,657 on November 22, 2022. Despite the renewed FUD, investors who purchased BTC at sub-$5k prices are up at least 4X.

Volatility, Randomness, Stressors

“Out of life’s school of war — what doesn’t kill me, makes me stronger.” ~ Friedrich Nietzsche

Pundits have taken Bitcoin for dead at least five times since its inception, only for it to reemerge with a broader mainstream following. Bitcoin’s protocol continues to thrive in the face of volatility (geopolitical), randomness (economic feedback loops), and stressors (exchange debacles) to which it is exposed. Despite this backdrop — or perhaps because of it — investors should continue to expect Bitcoin’s resurgence from the dead, as has been the case over the past 14 years.

Author also wrote: Mountainous Ambitions | The World’s Richest Man | A $260 Billion Mistake | Wargames Investment Strategy | Fooled By Randomness | Our Airbnb Experiment | Wealth Transfers | 5 Stocks: S&P’s YTD | Inflation Hedges | An 80-Year Life | 13 Rules | N. Taleb’s Minority Rule | Your Inner Voice | Bitcoin’s Volatility | Blockchain Stocks | 50 Investment Lessons | Flywheel Effect | Bitcoin: Mental Framework | Crypto Moonshots | 4 Crypto Stocks | Bitcoin: Insurance | Brief History: Money | Spontaneous Order | Ackman’s $2.6B Moonshot | Fragility Inducing Events | Antifragile: Definition

Disclaimer: Topics covered herein are for informational purposes. Before acting on investment information, consult with a financial professional.

New to trading? Try crypto trading bots or copy trading on best crypto exchanges

Bitcoin
Cryptocurrency
Money
Blockchain
Investing
Recommended from ReadMedium