Bitcoin Ends 2016 as the Top Currency as It Nears $1,000
Raise your hand if you saw this coming: Bitcoin not only bounced back from its 2015 doldrums, but went on a tear that saw it climb around 120% from the start of the year. As of Wednesday afternoon, the crypto-currency was hovering around $970, and it has a shot of breaking $1,000 before 2016 is over.
Compare that to some of the other places you could have parked your money. Investing in equities would have earned you a modest 9% through the S&P or 7% from the tech heavy NASDAQ. Meanwhile, gold gave up most it gains from the year to finish up around 6% while oil was up about 50%. (The best performer of the year may have been chip stocks, which gained over 200%).
Bitcoin was also the clear winner among other currencies, easily outstripping the approximately 20% gains posted by the Brazilian Real and the Russian Ruble.
Here’s a screenshot of its annual performance, courtesy of Bitcoin Charts:
Bitcoin’s booming 2016 certainly came as a surprise to skeptics like me, who pointed to the failure of mainstream Bitcoin businesses to catch on, and investors’ decision to turn their attention to other types of blockchain instead. The 2016 performance is all the more surprising given that the crypto-currency absorbed yet more bad news this year, including a scary-sounding IRS investigation.
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So what explains Bitcoin’s banner year? Popular explanations include the risk of currency controls in China as well as geo-political instability that is leading people to seek a safe haven for those assets. Another reason could simply be bitcoin’s staying power—the longer it’s around, it seems less like a novelty and more like a bona fide store of value.
But if you’re thinking of rushing out to join the bitcoin bonanza, recall what happened the last time bitcoin went north of $1,000, which occurred in late 2013. This chart shows what happened the following year:
It’s true that the currency has displayed far fewer volatile swings than it has in the past. But, well, it’s bitcoin we’re talking about here. So it’s hard not to imagine there are not more jolts and surprise swings in the months ahead.
But to those who bought and held bitcoin a year ago, congratulations. It looks like your 2017 will begin on a sweet note.