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Crypto Performance as an Asset Class



When it was widely introduced in 2009, cryptocurrencies, especially Bitcoin, were originally intended as a medium for transactions in the digital realm.

However, the crypto community is now starting to view Bitcoin as a store of value. In other words, people now see Bitcoin as a means of investment.

The crypto community embraces Bitcoin as an investment instrument because it is considered the most appropriate store of value cryptocurrency. This is because the supply of Bitcoin is limited, which is only 21 million pieces in this world.

Well, to judge whether or not an object is said to be an asset, of course we have to look at the movement of its value in a certain time span.

Looking at Bitcoin Price Trends

In general, the price of Bitcoin in the last 10 years (15 August 2011 to 6 August 2021) has grown by 36,563.44%, from a position of US$111.78 to US$40,982.39 per chip. The movement can be seen in the following graph:

Crypto Performance as an Asset Class, Pluang

However, the significant increase in Bitcoin price did not occur in a straight line. Bitcoin prices have peaked so fast, but also dropped in an instant. The summary is as follows.

2017: Bitcoin experienced the Bitcoin Bubble

In December 2017, the price of Bitcoin had jumped 2,127.8% in a year, as shown in the following chart.

Crypto Performance as an Asset Class, Pluang

In a study released last 2019, two University of Texas professors John Griffin and Amin Shams said that the spike was caused by the actions of one crypto bookie (or whales) who bought Tether (USDT) in large quantities. .

Seeing this condition, market participants suspect that there is market hype for crypto assets, so they also buy up crypto assets on a large scale.

2018: Bitcoin Had a Severe Fall

However, the market frenzy will surely subside quickly. Sure enough, the price of Bitcoin fell drastically 83.12% a year later.

Crypto Performance as an Asset Class, Pluang

Many people say, the drop in the price of Bitcoin at that time was caused by market panic over the information circulating in the cryptocurrency market. One of them is the Commodity Futures Trading Commission (CFTC) investigation and the US Department of Justice conducted an investigation into Bitcoin price manipulation a year earlier.

In addition, the CFTC also examined Bitfinex, a crypto platform suspected of being a means of manipulating the Bitcoin price increase.

2021: Bitcoin Rises Before It Falls Again

Bitcoin price then found its momentum again in 2021. This time, the cause was institutional investors who were keen to accumulate Bitcoin as an investment instrument. Notably, companies like Tesla, Microstrategy, and Square have continued to increase their Bitcoin holdings throughout this year.

Not only about adoption, the increase in Bitcoin prices is also caused by the proliferation of crypto asset exchange platforms. As a result, the demand for Bitcoin has increased. Bitcoin price also managed to peak to US $ 60,300 on April 12, 2021 ago.

Crypto Performance as an Asset Class, Pluang

However, the price of Bitcoin fell again after that. The main reason is China’s action which started cracking down on Bitcoin mining in the country. In addition, several global financial services regulators have begun to highlight the activities of the Binance exchange platform. They consider Binance’s activities are not in accordance with the regulatory model that applies in each of these countries.

Bitcoin Price Trend Comparison and Other Assets

Although the movement is somewhat up and down, the actual performance of Bitcoin as an investment asset is not inferior to other instruments. In fact, Bitcoin’s performance far outperforms other assets such as gold and the S&P 500. For more details, you can see in the following chart.

Crypto Performance as an Asset Class, Pluang

Crypto Performance as an Asset Class, Pluang

How Will Bitcoin Price Move Forward?

In fact, no one is able to accurately predict the price of Bitcoin in the future. However, the price movement of Bitcoin, along with its status as an investment instrument, is highly dependent on the following two factors.

1. Adoption of Bitcoin by Institutional Investors

The demand for Bitcoin will increase if many institutional investors use it as an investment instrument. That, of course, could increase the value of Bitcoin going forward.

This trend has actually been seen in 2021, where conglomerates such as Elon Musk and Michael Saylor have included Bitcoin as part of the investment portfolio of their companies, namely Tesla and Microstrategy.

According to Bitcoin Treasuries data as of August 6, 2021, global corporations have held 389,958 pieces of Bitcoin, 2.08% of the current Bitcoin circulation of around 18.77 million pieces.

2. Government Regulation

Bitcoin demand will increase if government regulations support the mass use of cryptocurrencies. One example is El Salvador’s move to legalize Bitcoin as an official payment instrument in the Central American country in June 2021.

However, the demand for Bitcoin will ramp up if the government is restrictive about it. One of them is shown by China. The government of the bamboo curtain country has considered everything related to cryptocurrencies, such as initial coin offerings, as illegal since 2017.

However, more and more countries are starting to follow in El Salvador’s footsteps to adopt Bitcoin as an official means of payment, one of which is Paraguay.