After a disappointing year for bitcoin we’re at a point where to be a buyer you need conviction in the long term story. Traders are heading for the door. We utterly retain that conviction. But we’re conscious that we have to unravel the reasons behind the recent weakness to establish a good entry level.
The broad conclusion is that a combination of behavioural, educational and macro factors are behind the sell-off. Bitcoin is highly sensitive to liquidity conditions and this is becoming problematic. Further, bitcoin is widely considered a high risk asset, and so long as this is the case it will behave like one, but only up to a point. Its core attributes as a scarce monetary asset for an internet age will be recognised at some point and long term accumulators will discover a clearing price.
The obsession with price is masking developments in bitcoin’s utility. This is hugely important because ultimately adoption will drive the network effects which will drive value. We look at some advances in adoption and technology, both as a savings asset and as a practical form of money.
Most investors will be oblivious to these developments.
