Many investors expected bitcoin to behave like a safe-haven asset, similar to precious metals, given the world's increased uncertainty. After all, bitcoin has earned a reputation as digital gold, so it should be a safe haven for investors in these uncertain times.
The cryptocurrency community was quick to respond to the former Goldman Sachs CEO's situation. Tuur Demeester, the founder of bitcoin fund Adamant Capital, took a broader view, pointing out that the bitcoin price has risen 10,000 percent in the last six years, "with compounding annual returns of 116 percent." He recommends giving the market a moment. After all, bitcoin was only a few months ago trading at a new all-time high.
As the chart below shows, bitcoin's volatility is a double-edged sword that can result in dramatic price swings in either direction.
The bitcoin price isn't trading up to par for a variety of reasons, the most important of which is that investors are losing sleep. The Bitcoin Fear and Greed Index, which gauges market sentiment, is currently hovering around Extreme Fear. Despite the fact that Warren Buffett, the billionaire investor, advises being greedy when others are fearful and vice versa, investors have decided to ignore his advice. Nonetheless, there is a great deal of fear in the crypto markets right now.
Another explanation, as noted by trader PlanB on Twitter, is that bitcoin is maturing and trading more like a risky tech stock like Google than digital gold. Given that Google parent company Alphabet's stock has dropped 11.5 percent year to date, compared to bitcoin's 15 percent drop in the same period, the theory isn't too far-fetched.
Main Street & Bitcoin
Despite the cryptocurrency price crash, there is growing evidence of bitcoin's widespread adoption. Recently, the fast-food chain Shake Shack announced a bitcoin promotion that will run through mid-March, allowing customers to earn free cryptocurrency. Customers who use Block's Cash App debit card at the till will receive a 15% Cash Boost reward in bitcoin. According to reports, Shake Shack is looking to gauge millennial and Gen-Z interest in cryptocurrency and is hoping to capitalize on the popularity of the Cash App to pique their interest.
Shake Shack's approach differs slightly from that of other companies that have taken the bitcoin plunge, such as AMC Theatres, the Dallas Mavericks, and Tesla, in that it accepts BTC payments for specific transactions. Shake Shack gives participants a stake in the game by providing free cryptocurrency to customers, which may hasten bitcoin adoption in the mainstream.
Cryptocurrency has also been thrust into the spotlight as a result of the conflict in Ukraine. So far, Ukraine has attracted tens of millions of dollars in cryptocurrency, including bitcoin, Ethereum, and the stablecoin USDT. In terms of application, crypto outperforms gold in times of crisis because payments can be completed in near real-time "for a fraction of the cost of traditional [payment] rails," as Pantera Capital's Dan Morehead points out. Bitcoin has also gained traction in Russia, and Ukrainians have attempted to obstruct access in Russia so that Vladimir Putin's administration cannot use cryptocurrency to avoid financial sanctions.
Bitcoin Price Predictions
Meanwhile, the cryptocurrency community has never been shy about predicting bitcoin prices. The current bearish market cycle is no different, except that Wall Street is now involved as well. JPMorgan believes bitcoin is trading about where it should and predicts that its fair value will rise as market volatility decreases. The investment bank is bullish on the future and has set a long-term bitcoin price forecast of $150,000 as a target.
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