Bouncing Bitcoin

It doesn’t seem that long ago to us, but it’s actually been years since we wrote a Cryptocurrency 101 article to get Gents up to speed on this developing form of monetary exchange.  But years before even that article, way before it was in the headlines, we were encouraging people to learn more about Bitcoin.  Bitcoin is back in the news lately, and some might be wondering why and what has changed, if anything, about this particular cryptocurrency.

News

Part of the volatility we are seeing at the moment was led by Tesla’s announcement that it was suspending Bitcoin (BTC) as a method of payment for its vehicles due to concern regarding unsustainable energy use for mining cryptocurrencies.  However, Tesla had also recently sold off a portion of its substantial $1.5B holdings in BTC, leading to an additional $101M in its profits.  Add in Elon Musk’s combative and controversial tweeting and users cancelling their Cybertruck orders in retaliation, and you classic storylines for volatility.

Platforms

It’s only recently that both Paypal and Venmo have allowed users to buy, sell, and hold in crypto, including Ethereum.  This signals more acceptance to the marketplace in general and introduces people to an easy use case on a platform they are used to.

Pandemic

Government spending has led to inflation, and inflation often leads to capital flight into various asset classes as investors seek to hedge their bets and safeguard their assets.  Cryptocurrencies, with BTC as the most well-known and visible of them, have started to become part of those hedged bets.  Additionally, younger investors, like those who use the Robinhood app, don’t just see cryptocurrencies as a hedge, but as primary investment vehicles.    This has led to a lot of interest (and froth) in cryptocurrencies.

But these market moves that essentially consider BTC as a “reserve asset” seem to be signals against Tesla’s earlier move to use it as a form of payment.  Yet, these competing market signals indicate to some that perhaps BTC is “growing up” and the marketplace is beginning to see multiple simultaneous use cases.  It’s still too soon to tell.

Whenever BTC is at the top of the news cycle, you’ll often find plenty of articles predicting its imminent demise or encouragement to “get in now” before it goes to the moon in valuation.  We continue to hold the line we did when we first wrote about it in 2014: research and if it makes sense for you, maybe make a small initial investment to drive your learning about it and other cryptocurrencies.

Do you hold any BTC?  Any other crypto?  What are your thoughts about this space in the short and medium term?  The long term?  Share with us in the comments.

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