Macro Market overview
Bitcoin has been correlated to the NASDAQ for some time therefore it has been important to closely watch what the NASDAQ is doing. This chart shows a longterm upward trend since 2009. This longterm trend is still in action. Since the highs of November 2021 the NASDAQ has dropped by 31% bouncing off the key macro support level and now up by 10%.
Data source: TradingView. Bitcoin historical data on the weekly chart.
The above chart is the Bitcoin chart from 2012 - 2022. I have charted the historical trend line which is comparative to the NASDAQ longterm trend line. There is often a negative narrative regarding the volatility of Bitcoin however in a turbulent market we can see both legacy markets and emerging markets are volatile. The highlighted areas are the previous cycle tops take from a year prior.
Peak 1: Jan 2013 - Nov 2013 shows an increase of 9000%.
Peak 2: Jan 2017 - Dec 2017 shows an increase of 2543%.
Peak 3: Mar 2020 - Mar 2021 shows an increase of 1733%
We can observe the following.
Over a long term time frame Bitcoin goes up therefore the best approach is a long-term approach. Say no to a quick win for a quick fix. Slow and steady more often than not wins the race.
Volatility is decreasing as more retail and institutional investors enter the market.
As volatility decreases so are returns. However, the returns are still exceptional and not to be missed in the long run.
What is the Sharpe Ratio: Comparison of risk-adjusted performance of crypto vs traditional markets assets in terms of Sharpe Ratio. Data source Intotheblock calculates assets’ sharpe ratio by dividing their return over the standard deviation of their daily performance over the selected time period. The higher the Sharpe Ratio, the better the risk-adjusted return of an asset.
Data source: IntotheBlock
There is often a narrative that Bitcoin is volatile and although this is not a denial of the price swings that are inevitably experienced with a new asset class the above chart, using the sharpe ration shows that BTC has been less volatile than Netflix, Facebook, and Amazon. It was of equal volatility to Alphabet and more volatile than Apple, Microsoft and Tesla.
Price performance from 2017 - 2022
Data source: IntotheBlock
Data source: Intotheblock
The above charts show that since 2017 up to the second November 2021 peak Bitcoin has outperformed every one of the major tech companies regardless of the volatility experienced. Bitcoins ROI in the last 4 years was 7257% whereas its nearest competitor was Tesla at 2414%. With that said I’m sure no-one would turn their nose up at either. £100 in Bitcoin in 2017 would have been worth over £700,000 in November 2021.
Market Summary
Legacy markets and new asset classes such as Bitcoin and cryptocurrencies are currently full of uncertainty due to the broader geopolitical events.
Increased inflation
FED and the BofE interest rate increases.
Continued recovery from the pandemic and quantitive easing effects.
Most recent war between Russia and Ukraine along with already existing wars.
China’s rapid market growth due to the fastest debt growth in history.
Supply and demand - supply chain issues.
Potential take aways
It may be time for some readers to begin to make a financial plan
It may be time for some readers to do further research on Bitcoin and cryptocurrencies.
It can be helpful to zoom out when in doubt. Look at the big picture for Bitcoin and the future of the monetary system.
Start small and start safely.
Never put anymore capital at risk than that which you are willing to loose.