It's a simple exercise, people have done it for equities for a long time, if you take out the 10 best days for Bitcoin every year, based on percentage change, Bitcoins fallen 20% a year.
In other words, the gains in Bitcoin occur in a very short number of days, and even last year for instance, if you exclude the 10 best days, Bitcoin was only up 200%, the whole 1,600% move was actually concentrated in a very handful of days. How confident is that historical data holds for an asset like Bitcoin when the liquidity has changed so dramatically over the course of this many years?
This idea of avoiding market timing, really that's why you want to make sure you capture the 10 best days is really worked in a lot of liquid markets for years, right? For the S&P, it's really been since 1964 and in Bitcoin there's consistency, so it's not as if when you look at the history of Bitcoin that there's a few years where this is the case, it's really occurred in every single year.
One of the concerns here is that Bitcoin, you're going to have to believe you're going to have those days again, obviously there's still a very existential question about Bitcoins viability, maybe not cryptocurrencies as an asset class, but is Bitcoin the player? The mood in cryptocurrency is controversial right now, so long time holders are worried they have big gains and they're worried about falling prices, but Bitcoin is a great store of value, it works really well, it's kind of boring because it's not like the latest and most exciting project, but it is also one of the most liquid ways to get exposure to cryptocurrency.
There's a lot of on-ramps being built from you know, futures and potential ETFs, it's probably the clearest from a regulatory perspective so when institutions start to get involved, and they aren't in a big way, Bitcoins going to be one of the first places they start. The events that took place in 2014, which was a huge liquidity shock, you had the largest exchange announced a massive hack, that's not the type of seismic event taking place in cryptocurrencies today.
Traditional managers are taking this chance for what Bitcoins consolidating and they're seeing the case for this real store value, there's real plumbing being built to get educated, so this is great timing because it doesn't force investors to jump in and then learn later. It's giving a chance to really study this, it's kind of the environment you really want.
September 19, 2018
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