Cryptocurrency bitcoin’s (BTC) price has fallen 3.5% since Friday (8 December) to $41,676 at the time of writing (12 December) but remains above the $40,000 valuation that made headlines at the beginning of this month.
The currency has risen by over 150% since the start of 2023, aided by rumours of exchange-traded fund (ETF) approval and uncertainty in other markets. It was last above the $40k threshold in April 2022 – after which it plunged 50% by June of that year.
That led to the major crypto lender Celsius freezing withdrawals and filing for bankruptcy in July 2022, while FTX’s collapse four months later in November tanked prices further and could have spelt the end of BTC as a trusted asset. But, for good or ill, the currency proved more durable than some critics gave it credit for.
BTC is volatile, underregulated and still not widely accepted as a form of payment. In normal circumstances, these would not be appealing traits in an asset but there are benefits to sitting outside the traditional financial system.
Bitcoin operates in its own cycles of growth and shrinkage that is largely unaffected by the geopolitical considerations that threaten physical assets or foreign currencies. It had only negligible price deviations following the spread of Covid-19 and the war in Ukraine, the former of which tanked global stock markets.
In this way it can act similarly to an asset like gold, offering a hedge against inflation or greater returns than banks when interest rates are low. It is also more insulated from industry shocks than other crypto. A Reuters graph shows that the failure of Genesis, another crypto lender, the conviction of Sam Bankman-Fried and the guilty plea of Binance’s CEO have all had limited effects on BTC’s price.
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The currency has also historically been a good investment, in a longer-term view. Over the past five years, crypto has only been more highly-priced than it is now for 11 months, and even when it crashed following the crypto crisis in 2022 it remained well above what it had been before the climb.
Despite this, GlobalData research suggests that popular sentiment is not on bitcoin’s side. An analysis of social media posts by industry leaders suggests that only 35% of them discussing the currency were positive over the past year on average.
If the long-awaited bitcoin ETF comes to fruition – and Google certainly thinks it will – the dangers of holding crypto in an underregulated market will largely evaporate, and the crypto will truly have entered the ranks of respectable assets.
Our signals coverage is powered by GlobalData’s Thematic Engine, which tags millions of data items across six alternative datasets — patents, jobs, deals, company filings, social media mentions and news — to themes, sectors and companies. These signals enhance our predictive capabilities, helping us to identify the most disruptive threats across each of the sectors we cover and the companies best placed to succeed.