In a classic example of the old adage that ‘the numbers don’t lie’, cryptocurrency analyst Jason Choi tweeted his assessment of Bitcoin’s performance over the past two cryptocurrency sell cycles.
Choi’s analysis is not only accurate, but it is also an interesting explanation of overall crypto market behaviors.
Choi’s main premise is that Bitcoin (BTC) outperforms Ethereum (ETH) during crypto market sell cycles. He makes a note of the fact that while the entire market rebounding following the first sell cycle, the second sell cycle resulted in Bitcoin taking a much more solid recovery path than that of Ethereum. Bitcoin is clearly the stronger store of value.
Choi makes sure to note the fact that S&P 500 caps also showed heavy declines over the same period. With the fiat and crypto markets being so different, some have argued that it is barely worth making a comparison. However, large caps in the fiat stock market also saw declines. The worst performances were declines of around 43 percent, while mid-cap declines were similar, at around 50 percent.
Stock market dips were overwhelmingly the result of sudden sell-offs, resulting in extreme declines. This is not unexpected, as the market experienced consistent selling pressure over the entire 2018 year. Crypto, however, lost value over 90 days. Specifically, 70 percent of cryptocurrencies in the top 200 market cap lost 70 percent of their value over a 90 day time period.
7/ Comparing price during sell cycles for BTC and ETH gives us a better view. While the entire market rebounded post the 1st cycle, in the 2nd cycle, BTC price held up better than ETH. This signals that the market is viewing BTC as a better store of value during sell offs. pic.twitter.com/yGlJnt0IeJ
— Jason Choi (@mrjasonchoi) January 4, 2019
According to Choi’s analysis, these cyclical sell-offs, while following a similar pattern to other markets, are overwhelmingly emotionally driven in the crypto world — more so than in the fiat investment market. This reality is somewhat terrifying, as widespread investor panic was a late-term causative factor in the stock market crash of 1929 that led to the Great Depression.
The crypto market, however, is in a different time and a different place than the stock market could even comprehend in 1929. Investors have access to information, real-time news and market updates, and a plethora of opinions, forecasts, and viewpoints. This can be both good and bad, depending upon investor sentiment.
Regardless of the cultural differences of the 1920s as opposed to today, it is clear that tokens like BTC and ETH exhibit the same store of value potential that blue-chip stocks did within the fiat market. Movement for top performers such as these is less fear-driven, with more consumers showing strong confidence in the token’s store of value.
BTC on Top
Ultimately, Bitcoin remains the top store of value contender. It has obviously remained dominant in price, with averages consistently higher than ETH by thousands of dollars, regardless of performance.
Additionally, ETH is not regaining its previous market position after each loss cycle the way BTC is. While this is encouraging for Bitcoin, it does not bode well for Ethereum. Crypto tokens are capable of complete value loss, as there is no limit to how low a token value can fall.
This reality actually may be great news for crypto as a whole, as it struggles to find its footing amid a year of immense change, innovation, and excitement. New tokens, decentralized applications (dApps), and interactivity mixed with declining markets and other technologies are all contributing to a confusing market, even for the most seasoned experts. It just might be healthiest for the market as a whole if one coin established a clear store of value dominance, bringing trust, security, and a bright future to the world of cryptocurrency.
Do you think BTC is the best store of value? Could ETH be considered a real contender? Let us know in the comments below!
Images courtesy of Twitter