Bitcoin Experiences Extreme Volatility as it Plummets Overnight

Over the course of the past month, many precious metals investors may not have been aware of the crazy, wild roller coaster of a ride that was occurring once again in the world of Bitcoin.

With all of the current events unfolding around the circus that was the Presidential election, you cannot be faulted, as much of the media attention has been fully and wholeheartedly invested in covering that event.

This is for good reason, as the ramifications of the 2020 U.S. Presidential elections are going to have a rippling effect across the entirety of the globe not just in the short term, but for years to come.

However, one market that has been on fire, skyrocketing to near all time highs is that of Bitcoin, which has had a completely stunning month of gains, well, at least until this week that is.

The Extreme Volatility of Bitcoin

However, as the years went by, the focus shifted rapidly from transacting in Bitcoin, from building businesses built around Bitcoin, to holding Bitcoin as a speculative play, HODLERS took over and it became all about increasing Bitcoin to higher highs.

This is fine, even though it is very different from the vision that many had for Bitcoin within the community in those early days and unarguably, many have become fabulously wealthy by “investing” in Bitcoin.

Sadly, there are many more stories about those who came late to the Bitcoin party, jumping aboard the “hype” train and getting decimated in the process, as their emotions got the best of them, they invested everything they had into Bitcoin, only to then sell at much lower prices, as they could not stomach the extreme volatility that exist within the Crypto space.

For those with strong hands, who have dollar cost averaged into the Bitcoin world, they have fared much better, similar to those who have done so for years within the precious metals space, dollar cost averaging month after month, regardless of the highs or lows, mitigating their risks in the process.

Chart source, coindesk

However, the volatility seen within the Bitcoin marketplace is unlike anything else we have seen.

At the start of November, less than 30 days ago, Bitcoin was trading within a range that saw it testing the $14,000 USD level, however not breaking through.

Yet, after the U.S. election results began to trickle in and as it became more and more transparent that Joe Biden would be the next President of the United States, the shackles on the price of Bitcoin were not only discarded, but catapulted towards the moon.

Speculators went ham wild, diving head first into Bitcoin once again, sending the price from $14,000 USD to near its all time 2017 high seen during the last Bitcoin mania.

This resulted in a high of $19,374.84 USD per Bitcoin earlier in the week, before the Bitcoin bubble once again was popped, sending it crashing lower to $16,285.74 USD overnight!

How’s that for volatility?

This is Not the End of Bitcoin

This is not a bad thing, as competition to the government controlled fiat currency monopoly is never a bad thing, however, for people thinking that Bitcoin can only and will only go higher, they are sadly mistaken.

Big money has clearly made it known that they are dabbling within the crypto markets and have the ability to rapidly send it higher, then dump it lower, profiting each time that they do so.

For those who cannot stomach the Bitcoin roller coaster ride, I would suggest that you stay as far as away as possibly, as your emotions can decimate you in a market such as this, causing you to both buy and sell at extremely inopportune times.

Yet, there are those out there that do believe Bitcoin is nothing but a pure speculative bubble, such as the highly regarded Peter Schiff, who has been a constant critic of Bitcoin as an asset;

Peter Schiff regularly spars with Bitcoin enthusiasts on his Twitter timeline, which makes for some rather comical reading, as both sides regularly consider themselves proven “correct” due to the extreme wild swings that are seen within the price of Bitcoin.

However, there is one point that I wholeheartedly agree on with Peter Schiff and that is the fact that Bitcoin is absolutely NOT a replacement for the safety that physical precious metals offer, even though there are many Bitcoin fan boys and girls who would argue that it is.

As previously mentioned, I would put Bitcoin much more in the camp of competing with traditional fiat currency, which I believe would be vastly superior if volatility eventually normalized and it was used primarily as a speculative vehicle.

In Conclusion

The world is holding its breath in regards to so many issues at the moment and people are preparing to enter into 2021 with COVID-19 still hanging heavily over their heads.

Will the markets be able to adapt, will we be able to curb the spread and damage that COVID-19 is causing to the global economy?

What will become of the incredibly Divided States of America as we head into 2021, in which people appear to be more divided in their political views than ever before.

There is so much uncertainty, so much that is unknown, however one thing is certain and that is that volatility will be a continuing trend that will only grow from this moment out and be constantly present as we navigate our way through 2021.

Until then, stay safe and as always, keep stacking.

- Source, Nathan McDonald via the Sprott Money Blog

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Nathan McDonald

Financial journalist with over 10 years of experience. Writing about geopolitics, economics and all things related to precious metals.