Follow along with Justin as he becomes crypto-literate. This blog is part 3 of 6 in this crypto education series.
I'm afraid of missing out. Aren't we all?
That is certainly the sentiment fueling this blog post. Few people I know will ever want to dive into something new without the assurance that everyone else is coming with them. And inversely, if everyone else is getting in on something, we're all the more willing to jump in ourselves.
So how popular is cryptocurrency? How many of my peers, colleagues, business partners… or even competitors are adopting it?
In this blog I'll be looking at Bitcoin's performance over the last 10 years, the cycles of the crypto market, and how well the business and finance fields are adapting to and adopting crypto and the blockchain.
Bitcoin's performance over the last decade
Up until very recently, Bitcoin and altcoin cryptocurrencies have been anything but mainstream and widely adopted. You may have heard the occasional news story of a Bitcoin investor who got lucky and made millions of dollars, but most people consider investing in Bitcoin as prudent as investing in lottery tickets.
Well, investing in Bitcoin is a little more prudent than that. A lot more, actually. Even though Bitcoin has only been around since 2009, it was named the "best performing asset class of the last decade" (by an absolutely insane margin).
In the chart above, Charlie Bilello shows how Bitcoin ($BTC) has performed relative to other asset classes. Sidenote: If you use Twitter, Charlie is a great follow for investment information and advice. Charts and graphs are his thing, so you can always see what he's explaining––which I find super helpful. Makes things less abstract.
Now, something that stands out in that graph at first glance is the volatility, right? I mean, when Bitcoin is down it's DOWN (I'm looking at you, 2014 and 2018). And when it's up, it's UP in a major way (see 2013 and 2017). Why is there so much inconsistency year like we've seen the last couple of years?
The Cycles of Crypto
Like any market, crypto has ups and downs. The crypto market in particular has very clear historical cycles. The ups and downs are referred to with two names you may or may not have heard: the bear market and the bull market.
The terms "bear" and "bull" are used commonly in the language of finance. Simply, a "bear market" refers to a market where prices are trending downward, and a "bull market" refers to one where they're trending upward (or are expected to). Bear 📉 bad, bull 📈 good.
Look at Charlie Bilello's graph again. The red boxes (2014 and 2018) indicate when Bitcon was in "bear market". Now look at the span between each bear market. Interesting pattern, right?
In crypto, bear and bull market cycles typically come full circle every four years
That's because, in crypto, bear and bull market cycles typically come full-circle every four years, based on this historical data.
If we look at 2017, Bitcoin was in a major bull market where the price went from $2,000 to $20,000 in about 6 months. That's usually when you'll start hearing more buzz about Bitcoin in the news. But, of course, Bitcoin’s recognition always comes at the height of a bull market. People become curious and interested right before its next bear market cycle, when Bitcoin went from its all time high of $20,000 down to $6,000 in 6 months time. Since 2018 we have been in a long bear market where price was volatile and unpredictable, and then in late 2020 we re-entered the bull market cycle seeing major gains in Bitcoin and altcoins. Some believe that, as the use of crypto increases, the volatility of these cycles will decrease drastically.
Adoption of Crypto
When you look at the cryptocurrency adoption that has already occurred, it's easy to see that our world is growing increasingly comfortable and reliant on crypto.
Whether directly or through the help of partnered applications, you can use Bitcoin to make purchases at the following companies.
- Home Depot
- Whole Foods
Large companies like Tesla, Paypal, Square, and Microstrategy have added Bitcoin to their balance sheets as a hedge against inflation and as a long term store of value. Elon Musk, who is currently the wealthiest man in the world, is very vocal about his positive outlook on the future of Bitcoin and cryptocurrencies.
Some of the largest companies in the world have their hands in cryptocurrencies too: Microsoft, Samsung, Google, Facebook, Sony, Amazon, IBM, the list goes on. These tech giants have identified that the future of technology is in crypto, and they're making investments and advancements into blockchain technology.
Research shows that more than 85% of aerospace and defense companies planned on integrating blockchain technologies by 2021, and that 36% of small-to-medium businesses in the US accept Bitcoin as payment.
Crypto in Finance
Not only are the largest companies and industries in the world adopting cryptocurrencies, but governments and banks are also getting on board. I'll highlight a few developments and data points below:
- JP Morgan’s CEO Jamie Dimon has expressed (in no uncertain terms) that he is extremely opposed to Bitcoin and other cryptocurrencies. He once said that he'd fire any trader who purchased Bitcoin "in a second." Since 2017 he has changed his tune and, while Bitcoin is still not “his cup of tea,” he is a believer in Blockchain technology even to the point of having JPMorgan create their own cryptocurrency, the JPM Coin. He discusses the shift in this video. [I would love to embed the video here]
- The Office of the Comptroller of the Currency (OCC), which oversees US banks and federal savings associations, published a letter in January 2021 clarifying to these institutions their authority to use stablecoins to conduct payment activities and other bank-permissible functions. Since then, the OCC has continued to clarify and expand what banks and savings associations can do with crypto.
- Morgan Stanley then announced in March of 2021 that it would become the first bank to offer Bitcoin to its clients.
- In February of 2021, crypto's global market cap––the total value of crypto shares owned around the world––eclipsed $1 trillion dollars. By November of 2021, it surpassed $3 trillion dollars.
- Bitcoin’s market cap is now larger than Visa and Mastercard combined, which are the two largest payment services in the world.
In spite of its historical bull and bear cycles, Bitcoin has experienced an adoption boom as it has revolutionized the way that we send and receive payments. And, since its introduction in 2009, blockchain technology has changed the way that we secure and share information. This worldwide adoption trend only projects to increase as the world becomes more comfortable using cryptocurrencies as a means to exchange or store value, and as more use cases for the blockchain are discovered.