On Saturday, December 16, 2017, Bitcoin hit an all-time high of $19,343.04. A mere six days later on December 22, the cryptocurrency had crashed to $13,857.14, and eight days after that, it had melted down further to hit $12,629.81, a fall of 35 percent in only two weeks. 1 So, what happened, and what does it mean for Bitcoin’s future?
Bitcoin Volatility Index
Prior to the recent crash, the cryptocurrency’s history of extraordinary volatility had many market participants wondering, “Is Bitcoin the Next Bubble?” Here are just a few highlights of its ups and downs:
August 2014 – January 2015
This period, before most people had even heard of Bitcoin, should have been a warning to would-be investors. It started with a wipeout of 23 percent from August 1 to August 18, then a drop of a further 15 percent by September 19, then another 17 percent by October 4, then a meltdown of an additional 46 percent by January 14. That’s a 70 percent destruction of value in only five-and-a-half months!
- July 2015
The value of Bitcoin decreases by 33 percent in only twelve days, July 12-24. - November 2015
Bitcoin experiences a 24 percent drop in one week, November 4-11. - January 2016
Bitcoin falls 21 percent in a week, January 8-15. - June 2016
The cryptocurrency sees a 22 percent crash in only six days, June 16-22. - September 2017
The value of Bitcoin plummets 35 percent in two weeks, September 1-14. - November 2017
Bitcoin wipes out 21 percent in four days, November 8-12.
The unavoidable truth about Bitcoin is that crashes like this are just business-as-usual; to coin a phrase dear to the hearts of techies everywhere, “it’s not a bug, it’s a feature.” The 30-day Bitcoin Volatility Index is currently at an astonishing 8.20 percent. By comparison, the volatility of most major currencies averages between 0.5 percent and 1.0 percent, while gold’s historical volatility is only 1.2 percent. 2
Even Bitcoin fans agree that it’s an extremely volatile asset. Julian Hosp, co-founder and president of TenX, a company that provides cards that can be used to spend cryptocurrencies in the real economy, said recently that he expected to see Bitcoin’s extreme volatility continue. “I think we’re going to see bitcoin hitting the $60,000 mark, but I also think we’re going to see bitcoin hitting the $5,000 mark,” he stated in an interview on December 26.
Gold: The Safe Alternative Investment
Bitcoin’s volatility means that it can never replace gold in the flight to quality. Volatility means unpredictability, and how could anything so unpredictable be a safe alternative investment? When even the cryptocurrency fans say it’s not safe, savvy investors won’t be putting any money into Bitcoin unless they’re ready to gamble with losing it all. If you’re looking for a safe place to ride out the coming storm, check out gold and the rest of the precious metals complex.