Investors who have been kicking themselves for missing Bitcoin's (BTC 2.85%) run over the past year and a half have a chance for another bite at the apple. With a 53% decline year to date, Bitcoin is now down 67% from its all-time high set in November of 2021 and trading at levels we last saw in December of 2020. During this time, Bitcoin has lost more than $700 billion of value, more than the current market cap of Tesla (TSLA +0.15%).
Bitcoin is suffering from the same inflation and interest rate hike fears that have plagued the market, particularly richly valued tech stocks. In addition to these marketwide factors, Bitcoin (and crypto in general) has been hurt by the implosion of Terra (LUNA 0.88%) and the trouble at crypto lender Celsius, which just halted withdrawals and transfers of crypto. These platforms pay interest to borrow assets like Bitcoin from investors and then lend them out to generate a profit.
The freeze spooked investors and added the specter of additional selling pressure on Bitcoin as Celsius and other platforms like it could be forced to liquidate their holdings. But when these short-term storm clouds clear, the present may end up being a good time to initiate or add to a position in the largest cryptocurrency.
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Bitcoin has been here before
In the last crypto winter, Bitcoin reached a high of nearly $18,000 in December of 2017 before falling to about $3,400 by next December, for a peak-to-trough decline of just over 80%. This sounds familiar in the context of today's decline of nearly 70% from Bitcoin's all-time high. Holders who held on to their Bitcoin from that low point saw their investment become a 20-bagger less than three years later, in November of 2021, when it hit its all-time high of $68,721.
Now, I'm not saying that another 20X is in the cards here at this point, as Bitcoin now has a much bigger market cap. But this example shows us that Bitcoin has been down big before and rebounded dramatically, so there is reason to believe that Bitcoin can dust itself off and get off the mat for more gains ahead.
Ride the lightning
Bitcoin's Lightning Network, which was developed to help scale Bitcoin and make it more practical for transferring funds and making payments, rolled out on Block's (SQ 2.89%) Cash App this year.
Two interesting features of Lightning on Cash App include rounding off credit and debit card payments into Bitcoin for its 7 million-plus Cash Card users and receiving payments in Bitcoin. Users can also convert their paychecks (or part of them) into Bitcoin.
As CashApp's Crypto Product Lead, Miles Suter, explained it at Bitcoin 2022, "We're starting to roll out 'paid in Bitcoin' ... This is the largest deployment of a feature like this to date ... With two taps, you'll be able to pick a percentage between one and a hundred and boom, you're done."
With over 44 million monthly active users at the end of 2021, Cash App will make Bitcoin more accessible to more people than ever before. As a case in point, CEO Jack Dorsey says that after introducing these services, more than 10 million accounts have bought Bitcoin.
CRYPTO: BTC
Key Data Points
Get ready for Web... 5.0?
Speaking of Block, Jack Dorsey is a longtime and vocal proponent of Bitcoin. Dorsey left his role at Twitter in part to focus more on the Bitcoin ecosystem and, as such, recently announced the development of 'Web 5.0' via Block's crypto-focused TBD business unit. While many of the specifics of Web 5.0 are yet to be revealed, like Web 3.0, it will seek to be a decentralized version of the current 'Web 2.0' internet, except that unlike Web 3.0, it will be centered around Bitcoin rather than Ethereum (ETH 1.98%) or other cryptocurrencies.
Like Web 3.0, Web 5.0 will aim to take data and identity away from centralized platforms like Twitter (TWTR +0.00%) and Meta Platforms' (META 1.61%) Facebook and give them back to the users, who will be able to seamlessly use this identity to migrate from platform to platform without having to log in or have an account at each site.
It is still a very early stage idea, and it is unclear how it will directly benefit Bitcoin at this point in time, so it is best to view this development cautiously. But if nothing else, it could bring significant usage and new applications to the Bitcoin ecosystem in the future.
Is it time to buy the dip on Bitcoin?
Bitcoin has dropped sharply from the lofty heights it hit in November 2021, but looking ahead, there is reason to be bullish on the top cryptocurrency.
Bitcoin is still the dominant cryptocurrency by market cap, and we know that there will only ever be 21 million Bitcoin in existence, an appealing factor in a world where inflation is a persistent problem. Bitcoin has endured 80% drawdowns before and rebounded dramatically. With today's market cap being roughly the same size as ExxonMobil (XOM +2.71%), another 20X gain may not be in the cards, but there is no reason to think that Bitcoin won't again rally from its lows.
Furthermore, the Bitcoin Lightning Network and services like Cash App are making Bitcoin more accessible to more individuals than ever before. And further out, developments like Web 5.0, while speculative, offer the possibility of future upside. With Bitcoin trading at levels last seen in December of 2020 before it tripled from there, the present time offers an attractive entry point to those who feel like they missed Bitcoin's last run or to investors looking to build on their positions.
