What We Can Learn From Observing Bitcoin Beta
In the bear markets, Bitcoin volatility falls off a cliff. And this makes crypto and Bitcoin extremely scary to hold, because it may feel like it can never come back.
To visualize this data, the following is a chart of Bitcoin’s Beta value since 2017. There are visible declines in volatility in the bear market in the circled regions.
This contrasts sharply with today’s biggest tech stocks, which, on the other hand, don’t have extremely contrasting volatility cycles.
This evidence suggests to me that Bitcoin is still extremely early, and we’re at the point of global acceptance and adoption of Bitcoin being a perfect store of value.
I believe it is possible in the next 10–15 years we will be transitioning to a mainstream consensus that crypto is a good store of value and hedge against inflation, and there is a chance that Bitcoin’s extremely cyclical volatility may wean off. Bitcoin’s price might have a more steady annual price appreciation growth, as opposed to wild swings in the early days.
It’s not a perfect comparison, Bitcoin might be similar to the Dotcom bubble where stocks like Amazon and Apple swung violently as their future was unknown, but eventually overtime grew and stabilized in volatility. And if Apple and Amazon are 100x-200x since the 2000, I think it’s possible for Bitcoin to do another 200x in the next 25 years (or, a 24% CAGR over 25 years). So, $12M a Bitcoin in 25 years. Which equals 83 BTC to be a billionaire.
When people refer to “this bull cycle” or “this cycle” in anticipation of guaranteed fast price appreciation, I am very skeptical, because there is no guarantee that Bitcoin will go parabolic as we did in previous years. Or, it might be another year or two when it does.
Being long various forms of compute is going to be a very important investment play in the coming years and decades. I believe these 3 categories of personal computers/compute are extremely bullish for the long haul.
- Personal Computer — Microsoft and Apple
- Decentralized Computer — Bitcoin and Ethereum
- AI/GPU Compute — Nvidia
If Bitcoin was a perfect Store of Value with minimal drawdowns, it would not have such asymmetric return potential as it is still unproven. We are still early, and it’s still a very good time to get in.
