Bitcoin is the decade’s top asset but $100k is still a long way off

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A recent report by Goldman Sachs, naming bitcoin as the best-performing asset of the year so far has bitcoiners once again dreaming the $100K dream.

This isn’t the first time that bitcoin has outperformed other assets. Indeed, there have even been reports that have tagged it as one of the best-performing of the last decade. But what are the odds of history repeating itself? In the event of a new bull market, will bitcoin be, as Paul Tudor Jones once said, “the fastest horse in the stable” once again?

Over the past 10 years, bitcoin has seen gains of more than 5,700%. In comparison, the NASDAQ made 336%. When these same figures are examined over a five-year timeframe, bitcoin was up 96% while the NASDAQ made 69%.

But it gets more interesting when the timeframes are shortened further. In the last two years, bitcoin actually dropped 28% while the NASDAQ lost 11%. On a year-to-date basis, bitcoin has made 39% while the NASDAQ has made 8.8%.

For bitcoin to go all the way to $100,000, it would need to make gains of around five times its current price. This is less than the returns made by those bought before the crypto bubble of 2021 and far less than the early risk-takers of years back.

Back in 2019, when bitcoin was hovering at just above the $7,000 mark, going to $100,000 was a mouth-watering dream. But dreaming big with bitcoin seemed very rational. Here was this new decentralized financial asset, which no single entity could control, and that could disrupt the financial system, increase financial freedom, and make many people rich.

Back then, it seemed easier to believe that one can change the world if the disruptive asset that you are promoting might give huge returns. But the bitcoin revolution may appear less alluring as its potential future gains dwindle.

Is bitcoin good or just very lucky?

And there’s the elephant in the room to consider. Was bitcoin’s success in fact due to particularly forgiving financial conditions and a bull market that lasted more than 10 years? What if bitcoin was just lucky enough to be in a position to absorb the excessive capital created in the era of quantative easing?

When bitcoin hit its peak in 2021, interest rates were negative, financial conditions were loose, and the stock market was registering weekly all-time highs. Clearly, considering market and financial conditions, bitcoin had it easy. We’re also yet to learn exactly how much of the incredible bull run had been made possible through leverage and fraud.

Considering the bubbly road that bitcoin traveled to $69,000, the road to $100,000 looks, by comparison, not so easy. Certainly not as trouble-free as many might have thought in 2019 and 2020. Tim Draper may still be optimistic about bitcoin going to $250,000, but another attempt at going to the moon may have to come in a more orderly manner.

Interview: Tim Draper is still buying up bitcoin

Fraud and excessive leverage in crypto may be less possible in the future as the crypto space becomes increasingly regulated and enforcement efforts ramp up. Not to mention bitcoin’s allure as the new hot thing has surely been dented by scandals and time itself. So, could bitcoin be an old horse?

Bitcoin’s up against the US Treasury

Indeed, there’s a new perspective to consider when thinking about bitcoin’s potential future gains. During the first vicious bear market since the financial crisis, many assets have crashed hard, and some like Tesla have even crashed by as much as bitcoin. For the very first time, bitcoin’s speculative allure may be outshone by other, sexier, potentially even riskier assets. To put it simply, given current market conditions, there are many potential bargains and bitcoin is no longer the only player in the game that carries the allure of a highly speculative asset that can make exponential gains.

But it’s not just risky assets that are competing with bitcoin. It’s also up against the most risk-free asset in the world — the US Treasury. It’s said that you can’t go wrong with US treasuries unless you believe that the US government will default or the US dollar will collapse. These are both highly unlikely scenarios. Treasuries can make a huge comeback when the Fed pivots and begins moving once again to a lower interest rate-environment (although holding them would give the investor an unknown duration risk).

The treasury market is relatively easy to understand and is highly correlated to interest rates. With the short-term dated treasuries having yields of more than four percent and the longer ones hovering at around three percent, their coupon price on the secondary market is also lower than when interests rates were negative. Indeed, some long-dated treasuries and government bond-market funds are down by 40% or more from their highs.

Ethereum could still be bitcoin’s biggest rival

If all remains sound in the world of crypto and bitcoin starts going up exponentially, there’s just one last thing to consider: whether it will be the coin that will pull off the biggest gains from this point onwards. If it’s to take a similar trajectory to gold, it may well stabilize at a certain market cap and price range, with its other family members taking on a more volatile and speculative aspect.

In this scenario, Ethereum may be the one to shine. Unlike bitcoin, Ethereum didn’t make a new low during the FTX-induced crypto crash. It has also mirrored this month’s bitcoin rally to an equivalent 33%.

All in all, this time around, bitcoin’s road to $100k may be much more difficult than previously imagined, due to new competitors, and a new financial environment. However, if bitcoin survives these trying times, it would have survived a global economic crisis for the first time, a badge of honor that may be enough to rekindle its hopes.

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