Everyone is talking about Bitcoin. In fact, you probably have friends that love to tell you about...
Why Bitcoin Is So Volatile And How Christians Can Manage It
One of the most common criticisms we hear about Bitcoin is how volatile it is.
Many Christians are wary of investing in something that has such big ups and downs and perceive BTC as too risky.
Let's break down why Bitcoin is volatile, if it will always be volatile, and how believers can handle the rollercoaster ride.
Why Bitcoin is Volatile:
Bitcoin, and other cryptos, are the youngest and most immature asset class on Earth. Stocks, bonds, commodities, index funds, annuities, real estate, precious metals... all of these have been around for centuries or even longer.
Bitcoin was created by Satoshi Nakamoto in 2009.
This asset is still in its price discovery stage of life. Retail investors, governments, institutions, and family offices are still learning about digital assets.
Exchanges like CoinBase, FTX, Binance, and others are adding millions of new users to their platforms each month. In fact, Bitcoin is on pace to match or even beat the internet's adoption in the 90's.
(Source: FX Street & Cane Island Digital Research)
New investors and those that keep their crypto on exchanges are a lot more likely to trade, sell, and exchange assets out of fear or believing they can make a quick profit.
The amount of long-term investors grows slower. Much slower.
In 2020, Bitcoin experienced a massive price increase as institutional investors on Wall Street began treating Bitcoin like a tech stock or, "Risk On" asset. While this fueled Bitcoin's growth, it caused some problems...
Before we explore the consequences of this, here is a short history of Bitcoin's price dropping 30-90% since 2012.
(Research and graphic are credited to The Visual Capitalist)
The graphic is missing 2022's 50%+ drop which we'll cover momentarily.
As you can see from this chart, the big drops in price are often related to external forces, negative media hype, or hacks on exchanges (Bitcoin has NEVER been hacked... only crypto exchanges).
Much like investing in the stock market... the media drives fear, uncertainty, and doubt (or FUD as Bitcoiners like to call it) to drive the price down.
Investors then give into fears and begin selling Bitcoin.
However, long-term holders are rewarded for staying the course and not giving into fear. Below is a chart of Bitcoin's entire price history.
As Warren Buffet has said, "If you can't hold it for ten years you should not hold it for ten minutes.".
Investing in Bitcoin, or any asset for that matter is a long-term game.
Yes, there are some people who can successfully day-trade crypto and make a quick buck. But there are far more people with sad stories than there are those with big wins.
The reason Bitcoin has dropped so much in 2022:
Wall Street is treating Bitcoin as a tech stock or a "Risk On" asset. When the Federal Reserve raises interest rates, Wall Street often pulls the plug on their riskier investments.
This is why stocks such as Netflix, Facebook, PayPal and others have plummeted in value as well.
Wall Street is retreating from many of their "riskier" positions and its fueling the decline of Bitcoin's price at the moment.
Will Bitcoin always be volatile?
As Bitcoin is adopted, becomes mainstream, and the mining of all 21 million BTC is completed the price is expected to become far more stable.
For the next ten years? You should expect to see more swings in price.
How should Christians handle the volatility?
Again, this is where we have to admittedly connect some dots.
We do not have a piece of Scripture that reads, "And Jesus told his disciples, "Buy the dip!"".
However, we do suspect that God would likely instruct Christians to have patience with their investing strategy. Not to panic. And to keep one's long-term vision in mind.
Romans 12:12: Rejoice in hope, be patient in tribulation, be constant in prayer.
Proverbs 21:5: The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty.