Bitcoin As a Logarithmic Asset Class

cryptocurrency

Bitcoin is a new asset class that draws similarities with no other markets. Moreover, extreme volatility, speculation, and fear around Bitcoin have always kept the investors under FOMO or FUD. In 2016-2017, the rise of Bitcoin was so ardent that Bears seemed gone for long. It seemed like the price would not rest until the system is ubiquitous. However, the bear clutches of 2018-2019 has reaffirmed that cryptocurrency still has a long way to go before mass adoption.

Bitcoin on Linear scale vs Time

Bitcoin along with the cryptocurrency markets is now more than ten years old. Over the decade three prominent price actions have been observed on Bitcoin; in 2011, 2014 and 2017. Each one bigger than the other and showing stark similarities between each cycle.

In a logarithmic chart, the percentage increase is more important than the rise in value. This is important as a $200 rise might not affect the traders now, but two years before now, it would have created euphoria. Hence, the price on a linear scale does not accurately define a growing asset class.

Bitcoin As a Logarithmic Asset

The logarithmic chart of Bitcoin reveals a different story. The logarithmic chart of Bitcoin suggests that there has been linear growth on Bitcoin apart from the extreme price action in 2017-18. The growth of Bitcoin is expected to grow at the same rate on the logarithmic scale before reaching an asymptotic curve like Gold.

Logarithmic Chart of Bitcoin vs Time (Pic Cedit: TradingView)

An important trend-line being tested on the logarithmic scale of Bitcoin. A break-out from this would revive the bulls and probably begin the next bull cycle. However, a break-down would test $2400 and possibly $1900 levels.

The fundamentals of the cryptocurrency market suggests that it has a long way ahead of itself before there can be any significant mass adoption. The Lightning Network is still evolving on its own. Ethereum has outlined a series of updates to finally shift from the PoW to PoS protocol and implement sharding. Litecoin Foundation too is working on the protocol to introduce privacy updates to increase fungibility.

Regulation-wise, apart from a few nations like Japan, Australia, and Netherland, there are some or the other kinds of restrictions imposed or ambiguity and certainty prevalent in other countries. The biggest roadblock of Bitcoin today in being accepted as an asset class is the US SEC approval.

Bitcoin 24 hour trading volume on Different Exchanges (Pic Credit)

Nevertheless, in Q1 of 2019, various cryptocurrency trading avenues have been established all over the world for institutional investment. However, the 24-hour trading volume on Bitcoin also suggests subsidized action since last month. Hence, the bulls just might be losing control again, or the bears have already gone in hibernation.

 

The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.

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