By Justin McKennon, Co-Founder Coinbusters.io
2022 has been the year of the “Black Swan” throughout the world of cryptocurrency. From the fall of LUNA to the insolvency of 3AC, Celsius, FTX and now BlockFi, the market has taken major hits in value and credibility. Each one of these events seemingly was viewed as a once in a lifetime event. The fact that the industry has seen so many of these events has led to an erosion of confidence by many retail and recreational investors.
Bitcoin has historically been billed as a store of value. Since peaking in November of 2021 at $69,045/Bitcoin, the cryptocurrency has seen its price per coin drop down to roughly ~$15,700 per token. Even for the hardiest of investors, dollar cost averaging through these tumultuous market conditions has been difficult.
Despite these seemingly major headwinds, institutional adoption has continued to increase for many Web3 projects throughout the space. Polygon (MATIC) has established major partnerships for NFT marketplaces with Draftkings, Adidas, The Walt Disney Company, The National Football League, and more. More and more adoption and investments are being made by the likes of Meta (Facebook), Starbucks, Adobe, and other major companies.
But where does this leave Bitcoin? As a store of value, is Bitcoin still the answer the average investor should be seeking? I reached out to two well established investment advisors to see how this past year has changed their outlook on Bitcoin for investors.
Allen Harris is the CEO and Chief Investment Officer at Berkshire Money Management (BMM), which manages hundreds of millions of dollars for their clients. Allen and BMM do not currently invest their clients’ funds into any cryptocurrency assets. I was able to pick Allen’s brain about some of his views on cryptocurrencies and the market in general.
I’m inclined to agree with Allen. Risk is unique to each investor, and everyone has their own situation. Advisors such as Allen and BMM must consider everyone’s circumstances but prefer to focus on what they are very good at: traditional markets.
I also had the pleasure of speaking with Paul Farella, Managing Director at Willow and Willow Crypto, to see his thoughts on the market and how it has changed over the past year. Paul and the Willow team provide both traditional and cryptocurrency related investment services.
Paul’s last comment is an interesting one. Millennial and Gen Z investors are quickly becoming larger and larger percentages of the investing bodies in the market. Their focus and emphasis on digital technologies is clear and relentless.
When asked about how the various Black Swan events of 2022 have impacted the market, Paul replied:
From an optics standpoint it looks bad. These bad actors have done some serious reputational damage and probably knocked mainstream adoption back. The unfortunate part is that one of crypto’s main tenets is around trust minimization, but everyone trusting these third parties with their funds learned a very painful, hard, and unfortunate lesson. It really does highlight the importance of the “not your keys, not your coins”
No investment is without risk. So instead of asking, “Is Bitcoin really a store of value?” I think maybe the real question is — does it need to be, even in regards to black swan events? The biggest maturation in the world of cryptocurrency is seemingly the value in decentralized operations. Black swan or not, Bitcoin has and continues to be the leader in this area. As an individual investor or investment advisor, you must ask yourself: Is digital technology here to stay? Or is it just a flash in the pan?
I don’t think Bitcoin is a store of value – nor should it be. There are fewer and fewer Bitcoin being added to the supply and in circulation. There will only ever be a maximum of 21 million Bitcoin in existence. If the demand for Bitcoin stays at the same level or increases, then the price could appreciate considerably. However, regulations and other unknowns could completely hamper the value of Bitcoin just the same.
My bet? I think Bitcoin is here to stay. Its visibility and exposure at the institutional level increases on a seemingly daily basis. Nothing is immune to macroeconomic events, but smart money looks to identify winners during bear cycles, and I plan to keep it part – albeit small! – of my portfolio.
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