Bitcoin experienced its worst month in almost a decade in May as the white-knuckle rollercoaster volatility returned following a Chinese crackdown on cryptocurrencies. Last month saw Bitcoin decline nearly 40%, making it the cryptocurrency’s worst monthly performance since September 2011.
Since Bitcoin hit an all-time high just under $65,000 in April, a steady torrent of negative news has seen the grandaddy of digital currencies tumble up to 50% since that giddying high. However, it is not all doom and gloom. Here are three reasons why May’s meltdown is actually good news.
Bigger Picture – It’s Always Going to be Volatile
During the recent volatility, it has been hard to see the wood from the trees. The bigger picture has been overshadowed by the and wild swings. However, when looking at Bitcoin objectively and without emotion, the fact remains that Bitcoin is notoriously volatile. Throughout its history, and especially over the last half-decade, Bitcoin has been mainly volatile. With the exception of an eighteen-month period of consolidation in 2018/2019, Bitcoin has and will always be volatile.
Despite all the recent volatility, the reality is that after rising 305% in 2020, Bitcoin prices remain up more than 25% this year despite the events of last month, making this one of the best performing asset classes since the start of the year. Over 12 months, Bitcoin has gained more than 270%. There’s every reason to believe that what we have seen is a correction, not a trend.
Chinese Crackdown is Not a Long-Term Concern.
Now, if you had a month and a half ago that you could buy Bitcoin at nearly half its price, you would more than likely bite someone’s hand off for it. Not that much changed except the Chinese crackdown on cryptocurrencies. The ban on crypto in the world’s second-largest economy will undoubtedly have repercussions, mainly on mining. However, it is not as bad as it seems.
In the long term, the Chinese crackdown on crypto is a good thing. China has consistently been a source of uncertainty and unpredictability when it comes to cryptocurrency and Bitcoin in particular. China has also helped maintain the narrative of ‘bitcoin mining is centralized’ and ‘bitcoin mining uses dirty power’ for some time.
The Chinese crackdown clears the way for wider adoption, development and investment. Bitcoin is bigger than any country, including China.
Bitcoin is a Bargain
The fact is that Bitcoin, the best performing asset of 2020, is almost half the price it was less than two months ago. You are able to jump on the Bitcoin rollercoaster at nearly 50% of the cost just six weeks ago. For those with faith and an eye for long term investment, now really is the time to buy Bitcoin.
That terrible month in September which saw a 45% loss, was followed by another big loss in October 2011, down 35% and bottoming out at $2. June could see it bottom out some more but already Bitcoin seems to find support around the $37,000 mark. Just as the rollercoaster looks like crashing through the key $30k mark, the buyers come out and snap up the digital currency, pushing it higher.
All the same institutions like JPMorgan and Grayscale, still have their Bitcoin holdings. There hasn’t been any panic sells. Bitcoin is never for the faint hearted. However, for those brave enough, now would be a good time to jump into Bitcoin.
