Amid the broader market crash the past month Bitcoin, and all cryptocurrencies as a whole, declined moderately before suddenly nose-diving this past week to levels not seen in almost a year. The primary concern for Bitcoin at the moment is declining consumer activity reducing its use and institutional support for it. While there still may be more turbulence for Bitcoin linked to broader market trends for a while as the world grapples with coronavirus nonetheless, at its current price I think it's a good entry point to pick up some of the core blockchain asset (and indeed I did).

Bitcoin's Decline Made The Dow Look Calm

When markets initially began thrashing back and forth in late February Bitcoin initially held steady at the mid-9000 level it had floated around at for a month. Bitcoin's range actually for the entire past half year had been relatively consistent, bouncing generally around the $7000 to $9000 range with occasional moves up or down out of that. However, as the selloff accelerated Bitcoin began dropping as well, going from the $9000-level to the upper $7000's, roughly a 10% drop, and held there for a little while longer as markets continued their historic volatility.

(Source: CoinMarketCap)

Then, as markets began their 2000+ point declines, Bitcoin and other cryptos finally fell through - Bitcoin went from about $7,900 the night of March 11 to $4,400 the night of March 12, a 44% drop in one day, before bouncing up to the mid-5000's where it's held steady since. Nonetheless, even at the mid-5000's it's still a roughly 40% to 45% decline from its levels just a month prior and a selloff far greater than that of the rest of the market.

(Source: CoinMarketCap)

So Much For #DropGold...Or Maybe Not?

There has been a lot of speculation around Bitcoin having achieved the stability and widespread adoption to be considered a "digital gold" hedge against the markets and in contrast to actual gold. In some ways this is true as Bitcoin's current position is vastly different than it was a few years ago when cryptocurrencies first went mainstream with the general public circa late-2017 and 2018.

Nowadays Bitcoin has shown it can survive the threat from altcoins, namely the thousands of other upstart cryptocurrencies out there, and particularly the ones that have tried to become general-use mass market cryptos like Bitcoin. As shown below while there was a renaissance surge in altcoins throughout 2017 and 2018 Bitcoin has re-established its market share. Furthermore Bitcoin has been one of the only cryptos to even remotely keep its prices consistent to those seen over the years as other altcoin prices have tumbled into oblivion.

(Source: CoinMarketCap)

Bitcoin Thrives When Economic Activity Thrives

Bitcoin essentially has shown it has some market stability compared to other cryptos over the medium and long-term. It is now increasingly a widely accepted means of payment by consumers and businesses and has a variety of banking, government, and other institutional support and regulation (such as futures, ETFs, etc.) that give it enough grounding to stick to a somewhat controlled market. As compared to gold, largely a safe haven nowadays in the belief that central banks and sovereign nations will increase their stores when global financial systems experience turbulence, Bitcoin is now actually utilized in daily transactions while gold is not. This is particularly important in cryptos where essentially adoption is the driver behind their prices and the adoption inertia of Bitcoin now appears to have been challenged as much as it could and prevailed, at least for the medium-term future.

Yet because of Bitcoin's use as an actual means of exchange this is also why its decline amid the broader market turmoil the past month should not have been surprising but rather expected. When markets decline so drastically, shaking up everything from bonds to gold as well, that creates worries for economic activity in general. When there is a decline in economic activity, from a combination of sustained disruptions to businesses and consumer buying/spending, that means transactions in general will decline and with it use of Bitcoin. Bitcoin also has a particular orientation towards international transactions, being easily movable cross-border, which makes much of the recent international decoupling from travel restrictions also particularly burdensome to its use and demand. As we see below when markets began declining Bitcoin was surprisingly correlated to the move of the markets as a whole.

Data by YCharts

As shown below too it appears Bitcoin's behavior when markets are healthy is that it is healthy too as the belief in its usage as a means of consumer and business transaction increases amid broader sustained economic activity.

Data by YCharts

(Source: CoinMarketCap)

This is where I think the buying opportunity for Bitcoin begins to make sense at this stage where its price level is in the $5000's. When market activity begins to ramp up again, or at least a sense of economic stability returns, then the belief in revived consumer and business activity will cause transactions-based financial instruments, of which Bitcoin is now one, to see increased demand.

If markets continue to experience the historic volatility they have been the past month, as it seems they very well might amid the fight against coronavirus, we likely will see Bitcoin experience continued dramatic price movements as it is still unclear how sustained and harsh the impact of coronavirus will be on markets and the economy.

Nonetheless, I think for a cryptocurrency that has shown its staying power for years in the wild and untamed crypto markets, and which now seems to have reached a strong inertia point that is particularly essential for cryptos, buying in some at this price point looks to be a fair risk-reward proposition.