It's been a while since Bitcoin (BTC +1.52%) tested the will of investors. During the first few months of 2024, the cryptocurrency seemed to only go up, rising from $45,000 to a new all-time high of more than $73,000.
But since then, things have taken a turn. Over the last month Bitcoin has remained range-bound in bouncing violently between the $73,000 mark and at one point even sinking to $57,000. With so much turbulence, it's natural to wonder if this volatility is a cause for concern or should be brushed off.
CRYPTO: BTC
Key Data Points
A day in the life of Bitcoin
While over the long term, it's clear that Bitcoin's volatility is declining, in 2024, and more especially over the last few weeks, Bitcoin experienced increased levels of volatility. While this whipsaw action can test the will of investors, it can't be emphasized enough that even in bull markets, volatile price action is par for the course. By taking a look back at past bull markets we can see just how prevalent this behavior can be.
Consider that during the last bull run of 2020 and 2021, there were several corrections of more than 20%. There was even one of 32%. Yet, it wasn't enough to prevent Bitcoin from notching a new high.
For those who were around back in the bull market of 2017, you may have forgotten how rough that ascent was. Over the course of a year, Bitcoin experienced a handful of 30% drops as well as four 40% corrections. However, yet again, it wasn't enough to stop Bitcoin from eventually hitting a new high.
Let this chart serve as a reminder of the storms this market has weathered in the past.
-- Jelle (@CryptoJelleNL) March 19, 2024
We've made it through far worse.
It's going to be OK.#Bitcoin pic.twitter.com/J2N2xB4wTU
While Bitcoin is different in that it is a cryptocurrency, it isn't immune to the same laws that govern stocks, economies, and even nature. What grows at a fast rate must be reined in at some point. Forest fires happen, but they lay the foundation for a new period of growth.
Fundamentals remain intact
For investors spooked by Bitcoin's price action, it is imperative to take a step back and account for the bigger picture. Even when Bitcoin's price tumbled from $68,000 to $16,000 in the most recent crypto winter, it was still the most decentralized, resilient, and secure cryptocurrency. For those reasons and a few others, that's why I was buying heavily back then.
Fast-forward a bit, and while Bitcoin has since risen from the depths of the crypto winter and regained some of the losses since slipping to $57,000, those same characteristics that make Bitcoin so unique are still intact today. In fact, when accounting for these fundamentals and considering recent developments, Bitcoin's current position appears even more attractive as a buying opportunity.
For example, Bitcoin just underwent its fourth halving on April 19. Historically, in the years that a halving occurs, Bitcoin's price has increased by roughly 125%. While past performance is no indicator of future results, it isn't hard to see how halving alters the dynamics around supply and demand. With a cut to its production rate, the halving exerts upward pressure on Bitcoin's price even if demand remains constant. If a similar situation were to unfold this time around, Bitcoin could see its price hit $100,000 by year's end.
Moreover, the recent approval of nearly a dozen spot Bitcoin ETFs in January has opened up the cryptocurrency to a broader investor base, as it can now be conveniently purchased through traditional brokerages and added to IRAs, 401(k)s, and other investment accounts. Not only does the approval of these ETFs serve as a de facto stamp of legitimacy that Bitcoin is here to stay, but it will inevitably add additional demand for its finite supply and could make this halving particularly explosive.
The bottom line
There are all kinds of predictions out there calling for Bitcoin to hit different monumental targets. While some are sensational and nothing more than an attempt to grab some headlines, the overarching theme isn't wrong -- over the long haul, Bitcoin remains on an upward trajectory.
While this doesn't mean Bitcoin won't experience setbacks, the point to keep in mind is that periods of volatility are nothing but noise in the short term. If Bitcoin heads to $100,000, $500,000, or even $1 million, which may sound crazy but is well within the realm of possibilities, these stretches of uncertainty and fear will be a distant memory.
