Bitcoin price tops $22,000, should you care?
Bitcoin price is surging again to a new all-time high; is it driven by individual or institutional investors?
It's that time of year again, when Bitcoin's price hits all-time highs and hodlers brag to their family over holiday meals. Or at least that's how it went in the past. With almost three years to the exact date under our collective belts since the last all-time high, should you care that new records are being set?
Bitcoin isn't alone in the spotlight
There's no shortage of news right now to keep the price of Bitcoin out of the spotlight: between elections, coronavirus, vaccines and economic struggles, there's a lot to take in. Cast your mind back to the end of 2017; do you remember the cryptocurrency frenzy?
Reminiscent of 2017, Bernard Baruch describes a scene before the stock market crash of 1929.
"Taxi drivers told you what to buy. The shoeshine boy could give you a summary of the day's financial news as he worked with rag and polish. An old beggar who regularly patrolled the street in front of my office now gave me tips and, I suppose, spent the money I and others gave him in the market. My cook had a brokerage account and followed the ticker closely. Her paper profits were quickly blown away in the gale of 1929."
This quote may be from a 1996 Fortune magazine article by John Rothchild, but it proved true on December 12, 2017, when the Financial Post published a piece calling this same situation to light concerning Bitcoin.
"Whether it's the shoeshine boy of decades past or the taxi driver of more recent times, an old investing adage suggests that when somebody you wouldn't expect is talking stocks or giving you portfolio advice, it's time to sell. And these days, it's hard to find someone who isn't talking about Bitcoin."
Google Trends data for Bitcoin
Bitcoin plummeted after its 2017 highs; is it doomed to repeat?
From the all-time high on December 17, 2017, to its following low about one year later, the price of Bitcoin dropped around 84%, depending on what source you check - a drop of more than $17,000 per Bitcoin in a year's time. Google Trend data followed in line with price fluctuations with a 90% decline, dropping from 100 to 10 in search trend volume.
Search trends for "Bitcoin" at the moment are laughable compared to the 2017 highs, aligning closer to 2018 lows than 2017 highs while prices overtake 2017 caps. Does this mean that shoe shiners and cab drivers aren't in the driver's seat for this price rally?
Many important things have happened since the last Bitcoin all-time high:
- Major companies like PayPal and Square have started offering cryptocurrencies.
- Bitcoin has withstood multiple bubbles and never bottomed out at $0.
- Banks can officially operate as cryptocurrency custodians for customers.
No one knows exactly what will happen with the price of Bitcoin, but the fact that many massive companies and banks are offering cryptocurrencies certainly lends credibility to the overall concept.
What does this mean for you?
The US stock market is often viewed as an indicator of the economy as a whole, but only 14% of American families are directly invested in individual stocks (excluding retirement accounts), according to the Pew Research Center. So when the US stock market hits an all-time high, individual Americans don't see a huge return on their investment while institutions typically do.
With crypto, all-time prices in the past have frequently led to major drops and corrections when the market becomes overbought. This may prove to be true, and if/when it happens, hodlers will probably continue to hodl whether the public is watching or not.
Maybe the lack of cab drivers and shoe shiners discussing their portfolio has more to do with the global pandemic and less with a shifting trend in cryptocurrency, but maybe not. There are fewer unique Bitcoin addresses now than there were during the last all-time high.
Interested in cryptocurrency? Learn more about Bitcoin with our beginner's guide to Bitcoin, see how to keep your crypto safe with our review of cryptocurrency wallets and dive deeper with our Cryptocurrency learning hub.
Disclosure: The author owns a range of cryptocurrencies, including Ethereum, Litecoin and Bitcoin, at the time of writing.
Picture: Getty Images