Wall Street Should Embrace Bitcoin's Volatility, Says Pomp

Wall Street Should Embrace Bitcoin's Volatility, Says Pomp

Institutional investors who are new to the cryptocurrency market may find themselves surprised by Bitcoin's price fluctuations, which have recently influenced its market value. According to Anthony Pompliano, a well-known crypto entrepreneur and investor, this volatility is a long-standing characteristic of Bitcoin that experienced investors are well aware of.

Key Takeaways

Bitcoin has experienced significant price drops roughly every 1.5 years.
Recent market pressures are largely driven by U.S. investors and economic factors.
Bitcoin’s volatility can lead to considerable price movements, yet experienced investors view it as an investment opportunity.
Historical data shows Bitcoin’s price has grown substantially over the past decade.

Understanding Bitcoin's Recent Volatility

In a recent interview on CNBC’s Squawk Box, Anthony Pompliano revealed that the recent fluctuations in Bitcoin's price are typical and should not alarm seasoned investors. He noted that Bitcoin has experienced downturns of 30% or more on 21 separate occasions over the past decade. Despite current challenges, Pompliano believes long-term holders are familiar with these cycles.

“New investors are understandably nervous, especially as the end of the year approaches and they reconsider asset sales. This apprehension is contributing to downward price pressure,” he stated.

U.S.-Focused Sell-Off Trends

Matthew Sigel, the head of digital assets research at investment manager VanEck, discussed how the recent Bitcoin sell-off, which saw its value drop to approximately $82,000, was predominantly driven by U.S. market activities.

Source: Matthew Sigel

He attributed the downturn to tightening liquidity conditions and increasing credit spreads in the U.S., amplified by uncertainties surrounding substantial investments related to artificial intelligence amidst a delicate funding environment.

The Positive Side of Crypto Volatility

Over the past two months, Bitcoin's price volatility has notably increased, approaching a volatility index of around 60, which can lead to significant market movements in both positive and negative directions. According to Bitwise market analyst Jeff Park, this level of volatility often creates opportunities for investors.

In Pompliano's view, those who have been engaged in crypto investment for some time recognize that volatility can serve as a key indicator. He pointed out that Bitcoin has appreciated by 240 times over the last decade, yielding an impressive compound annual growth rate of approximately 70%. While such high growth rates might not be sustainable in the future, he believes that a compound annual growth rate of 20-35% in the coming decade would still yield superior returns compared to traditional equities.

Pompliano concluded, “This is why many Bitcoin enthusiasts are very optimistic about Bitcoin as an essential part of their investment portfolios.”

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