Crypto investors were in for a rude awakening on Wednesday. Most digital currencies were trading markedly lower, led by Bitcoin (BTC +2.69%) dropping roughly 5% overnight as it fell to just above $58,000.
It's been more than a week since Bitcoin hit a new all-time high, taking out its springtime peak. You'll see social media worrywarts and financial journos calling this a correction or even a more sensationalistic crash, but can we frame this in a longer shot? You have to go back nearly two weeks to find the last time that Bitcoin was trading as low as it was on Wednesday, but no growth investment only goes up in value.
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It's a matter of time
It's certainly true that Bitcoin has softened lately. By the time the market's opening bell rang -- using that just as a baseline since crypto trades around the clock -- Bitcoin had surrendered 12% of its value over the past week. Take a longer view and the math gets substantially kinder. Bitcoin has risen 37% over the past 30 days, soaring 359% over the past month.
Sure, a naysayer can cherry-pick the mid-April top for Bitcoin. The world's most valuable crypto would go on to exceed that high-water mark early last week, but it's now trading below that starting point. This shouldn't be a deal breaker. Many of the factors that have propelled Bitcoin northward -- moving sharply higher in four of the past five months -- are still in play.
Many people credited Bitcoin's all-time high last week to the long overdue arrival of the first official Bitcoin ETF. There are some shortcomings to ProShares Bitcoin Strategy ETF (BITO +7.13%), but it's already paving the way for other exchange-traded vehicles that use futures contracts to ride the ups and downs of Bitcoin.
It won't end there. It's just a matter of time before spot-based Bitcoin funds -- ETFs that actually own underlying currency -- clear regulatory hurdles. In the meantime we're seeing more financial services institutions and bellwether fintech apps legitimize cryptocurrency by announcing platform-embracing initiatives for Bitcoin.
There are legitimate concerns about Bitcoin itself. The energy costs to mine and process transactions are showing signs of tapering, but they're still substantial. Bitcoin is also the largest crypto denomination, but it's not necessarily the most practical in terms of applications in the blockchain food chain. However, with a $1.1 trillion market cap -- more than the next 30 largest denominations combined -- it will continue to be the crypto gold standard.
We're still early in the revolution. One of the bright spots in Robinhood Markets' (HOOD +8.12%) rough quarterly report that came out on Tuesday afternoon was its crypto activity. Revenue from cryptocurrency soared 860% for the third quarter when pitted to how it fared a year earlier. It was a substantial sequential dip from the buoyant second quarter, but the year-over-year gain is impressive for a platform offering just seven types of cryptocurrencies without a crypto wallet platform. The digital cryptocurrency wallet is coming to Robinhood Markets, and that's just one more way that Bitcoin is being validated in the investing community.
Volatility will come with the territory. Bears will celebrate every step back as the end of the crypto craze, even if Bitcoin took a few steps up before taking a breather. With crypto historically a strong performer in the fourth quarter, and with Bitcoin itself going mainstream it's hard to call this a correction, a crash, and much less the end of the revolution.
