It may be hard to believe, but Bitcoin is already approaching its 16th birthday, having started trading in 2009. But unless you’ve been living under a rock, you’ve definitely heard about its amazing returns, as the cryptocurrency has soared above $100,000. For the first time in December 2024.
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However, along with strong performance, often also comes high volatility, and this is certainly the case with Bitcoin. The crypto surged more than 40% in the first month alone following the 2023 presidential election, adding to its long history of erratic price movements.
So, with its price hovering around the $100,000 level, is Bitcoin officially a bubble, or is there still time to get in? Here’s a look at both ideologies.
Bitcoin price history and volatility
Even the most ardent Bitcoin bulls admit that the cryptocurrency is an extremely volatile asset. In fact, according to an analysis by Fidelity Digital Assets, over the past four years, from 2020 to 2024, “Bitcoin has been three to nearly four times more volatile than various equity indexes.” Given that equity markets are generally considered the most volatile of the popular investment classes, this means that Bitcoin may be too volatile for many investors.
Of course, investments should be evaluated on their balance of risk and reward, not just their absolute risk level. And many would argue that the huge returns Bitcoin has provided investors over the past few years more than compensate for the risk they take. Although crypto has suffered some heavy losses over the past few calendar years, it has the potential for even greater gains. Starting with the 2009 Bitcoin price determined by the New Liberty Standard, here’s a look at Bitcoin’s returns by calendar year since it began trading, based on data from Investing.com:
- 2010: 30,203%
- 2011: 1,467%
- 2012: 187%
- 2013:5,870%
- 2014:-61%
- 2015: 35%
- 2016: 124%
- 2017: 1,338%
- 2018:-73%
- 2019:94%
- 2020:302%
- 2021:60%
- 2022:-64%
- 2023: 156%
- 2024: 121%
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Factors in favor of higher Bitcoin price
Those who believe Bitcoin will continue to soar typically cite one or more of these reasons.
deregulation
One reason Bitcoin’s price surged after the November election was that President-elect Donald Trump is considered more crypto-friendly than his predecessor – he has already declared himself a “crypto czar”.
restricted supply
The supply of Bitcoin will be permanently capped at 21 million. Since there are already approximately 20 million Bitcoins in circulation, the cryptocurrency has already reached its maximum lifetime supply.
positive cyclical history
According to crypto brokerage Caleb & Brown, Bitcoin has gone through a fairly consistent cycle that includes four phases: accumulation, growth, bubble, and crash. According to their charts, Bitcoin is still in the growth phase, which should probably be followed by a rapid rise in price into the bubble phase.
bear case
Even despite Bitcoin’s meteoric rise, a lot of bears are urging investors to avoid the asset class, primarily for the following reasons.
no intrinsic value
While stocks represent actual ownership in various companies and the US dollar is backed by the federal government, Bitcoin has no such intrinsic value. The only thing driving the price higher is the optimistic belief among investors that the price will go higher.
high energy use
According to Global Research and Consulting (GRC) at UC Berkeley, Bitcoin uses excessive amounts of energy for production and transactions, and its continued growth will have harmful effects on the environment and contribute to global warming. This may lead to government regulations or restrictions in the future.
Impractical for daily use
While Bitcoin proponents suggest the cryptocurrency will eventually become a mainstream transaction currency – perhaps even replacing the US dollar – as of now, it remains impractical for daily use.
Its slow transaction speeds, limited acceptance, volatility and creation of capital gains transactions with every use may cause it to remain under-used. This, in turn, could limit any future price appreciation.
bottom line
Bitcoin’s explosive price action has been dubbed a bubble by many, but it is only a bubble if it eventually bursts. While Bitcoin’s historical price action suggests that the crypto may continue to rise, it is also likely that, at some point, it will face a massive correction.
The bottom line is that although the future price of Bitcoin is unknown at this point, the battle between bulls and bears will keep the crypto’s volatility high.
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This article originally appeared on GOBankingRates.com: Is Bitcoin a $100K Bubble, or Should I Get in on It Now?
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