Bitcoin, specifically, was created in 2009 after the economic recession of 2008, to become an electronic peer-to-peer cash system. Bitcoin, in short, was created as a way for people to send money over the internet. Unlike other currencies, the original specialty of Bitcoin would be unique in its ability to operate with a payment system free of central control. At the time, such forms of currency seemed like the new meta, but the path to cryptocurrency success has had less clarity than many imagined. In 2011, the company had its first boom from $1 to $32 and a 3000% increase over the next three months. Eventually, though, the price dropped to a lackluster $2 by mid-November. Such dramatic changes in Bitcoin were common throughout the 2010s and created risk for many investors. Still, the cryptocurrency market continued to persevere. However,the drastic drops in thousands of dollars were due to many reasons that many did not realize.
Recently the Bitcoin market value fell significantly from a peak of $69,000 in November 2021, to around $23,000, down nearly 56% year-to-date. The value plummeted, negatively affecting many investors who were riding high with significant growth in their bitcoin the previous year. The reality behind such numbers is that many cryptocurrencies such as Bitcoin, are being exacerbated by soaring inflation rates throughout the country. Coinbase, a company used as a cryptocurrency exchange platform, is seeing fewer transactions each day. Furthermore, Bitcoin and other cryptocurrencies fell sharply as investors dumped high-risk assets (like crypto and growth stocks) throughout the market. The urge to produce tangible cash and hold more secure value made Bitcoin’s price rapidly decrease. With all of the investors demanding to exchange their shares for money, it created an overall bankruptcy for other companies and has led to massive demands that were insatiable. Soon enough, supply chain chaos broke loose and such circulating supply, or the number of cryptocurrency coins publicly available and circulating in the market, decreased.
Throughout the world, conflicts such as the war with Ukraine and Russia have negatively affected many facets of world industries, and cryptocurrencies have been no exception. Bitcoin immediately slumped after Russia launched its assault on Ukraine as investors dumped riskier assets from their portfolios, opting for safer ones. Many such effects go underreported when a catastrophic event, like Russia’s invasion of Ukraine, occurs. As the war continues, volatility in global financial markets such as cryptocurrency is projected to continue. “Regardless of asset class, there's a tremendous amount of volatility that comes with war,” says Doug Boneparth, a certified financial planner and founder of Bone Fide Wealth. Amid border skirmishes there have been serious threats across the world, causing many to protect their portfolio in case of a rapid stock market crash. As the conflict continues to unfurl, future negative effects will be present in the cryptocurrency market.
But as a whole, many have seen the regression in Bitcoin stock as just another reminder of cryptocurrency’s volatility. The reality is that only time will tell when (if ever) asset classes like cryptocurrencies will progress and move ahead of such military conflicts and governmental policies.
