In 2017, the market cap of Bitcoin (BTC) jumped from $15B to over $237B in December of 2020. That’s a 15x jump, but nothing in comparison with what was to come. Between March of 2020 and March of 2021, BTC’s market cap swelled from $117 billion to $1.1 trillion dollars, eventually settling in around $883 billion for now.
That exponential jump represents the bull market roller-coaster ride of the crypto market. Bitcoin brought along with it Ethereum (ETH), which has outperformed BTC almost 6:1 this year—not to mention Cardano, Chainlink, and even Dogecoin.
But when you fly too close to the sun, you risk burning up. Or at least, that seems like a good metaphorical explanation for the cynicism that eventually brought the crypto markets down back mid-2021.
Mo money, mo problems
Bitcoin rose all the way to $60k a coin back in early April and maintained that range for about a month. Ethereum went along for the ride too, jumping parabolically to near $4k.
And just when more and more people jumped on the crypto bandwagon, the market got hit again. During the first couple weeks of May, prices fell off a cliff—Bitcoin went from $56k down to $34k, and eventually bottomed out in June and then again in July to below $30k. Prices then climbed back up near $53k earlier this week until El Salvador's rollout of Bitcoin as an official currency or legal tender hit a few snags, forcing BTC as much as 17% lower that day.
Nascent markets are expected to be volatile, but the accumulated response of varying events—El Salvador's BTC rollout issues, Elon Musk’s negative remarks, China’s crypto crackdown, exuberance over low-quality coins, profit-taking by investors, and SEC Chair Gensler’s stance that crypto should be regulated—makes selloffs that much more violent.
Despite the event of this week, BTC is still up 60% YTD and only down 3-4% from a week ago. Even without groundbreaking developments back in July, BTC slowly climbed back up over $50k and ETH up near $4k.
But catalysts like PayPal expanding crypto purchasing outside the US, some of the world’s biggest asset managers like Blackrock entering the crypto space, Ethereum’s roadmap upgrade that could reduce its supply thereby increasing its value, and standalone countries willing to make crypto their official currency, are giving investors hope that long term, returns would be more sustainable.
Takeaway. Crypto looks more like it’s probably here to stay. So if you’re considering investing, do so as long as your crypto investments don’t stand in the way of your financial goals, and be prepared for a bumpy ride as regulators are watching like hawks. Understand what you're investing in and invest only what you’re okay with losing.