Is Bitcoin Dead?

Is Bitcoin Dead?

October 10, 2022

Is bitcoin dead? Its price is down almost 60% year-to-date and it’s a similarly sad story for other digital currencies. On top of poor performance, the year has been riddled with negative news about cryptocurrency security and potential regulatory oversight. Just this week, Treasury Secretary Janet Yellen released a report asking Congress to legislate tighter regulations over digital asset trading.

Additionally, there have been large-scale layoffs at crypto firms and we’ve seen some serious flaws exposed in parts of the system as prices sank—the bankruptcy of crypto lender Celsius in July being the most notable sign of distress.

That said, all is not lost in crypto land: Last month, NASDAQ announced plans to act as a custodian for bitcoin and ethereum on behalf of institutional investors, and other larger financial institutions are lining up to offer similar services.

The fact that institutional adoption hasn’t evaporated is one key difference from prior crypto crashes. As for price performance, there are still some positive signals. I looked at bitcoin’s relative strength index, which tries to measure the rate at which the asset is selling, with below 30 being oversold and over 70 being overbought. What I found was that if you bought bitcoin every time its relative performance sank below 30 over the past four years, your average one-year return was 38%.

Now, that comes with some massive caveats, most notably that the drawdowns over the full period from 2011 to today have gone as low as 93% and buying on the way up would require more than a little market-timing magic.

In summary, it’s been a rocky road for crypto bulls this year, but that’s nothing new. I can’t say for sure that we’ve seen the bottom in prices—regulation, interest rates and distressed crypto-related firms are all huge headwinds. But crypto optimists are holding out hope for a bright future (and Fidelity clearly sees a market; it launched an ethereum index fund for accredited investors at the end of September). History shows us that it may pay to hold on to your coins as long as you can afford some big drawdowns along the way.

So is bitcoin dead? I’ll stick to my usual digital-asset disclaimer: Don’t invest more than you can afford to lose.


This material is distributed for informational purposes only. The ideas and opinions contained herein  should not be viewed as recommendations or personal investment advice. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.

Our statements and opinions are subject to change without notice. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged.

Past performance is not an indication of future returns. Tax, legal and insurance information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice, or as advice on whether to buy or surrender any insurance products. Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. We do not provide legal advice, nor sell insurance products. Always consult a licensed attorney, tax professional, or licensed insurance professional regarding your specific legal or tax situation, or insurance needs.

For a summary of Adviser Investments’ advisory services and fiduciary responsibilities to our clients, please review our Form CRS here.

© 2022 Adviser Investments, LLC. All Rights Reserved.

Adviser Investments' logo is a registered trademark of Adviser Investments, LLC.