What does the recent price crash say about Bitcoin as an investment? To explore that, we took a look at the historical context of today’s Bitcoin price.
As of this writing, the Bitcoin price is a little over US$7,000. That’s a lot lower than it was a couple of weeks ago, but it’s still higher than the historical closing price on all but 410 days of Bitcoin’s life (according to Coinbase historical data).
There have been 3,978 days between Bitcoin’s launch on January 3, 2009 and November 25, 2019, so the fact that Bitcoin has been a bad investment on just 410 sounds like a good thing. After all, Bitcoin has been a good investment on 3,568 of its 3,978 days. That’s nearly 90% of the total days it has existed.
On the other hand, 410 “loss” days — days when Bitcoin’s close price was higher than its current price — is way up. As recently as this July, Bitcoin was a bad buy on just 60 days. Now, that number is up nearly sevenfold.
Unfortunately, although Bitcoin has been a good investment (based on today’s price) for nearly 90% of its time in existence to date, that doesn’t mean that 90% of Bitcoin holders are actually looking at a profit in their wallets right now. Many more people have bought Bitcoin recently than bought it during its early years. Since its recent prices have been higher, more recent buyers are more likely to have lost money.
In fact, 2019 has been a particularly cruel year for Bitcoin purchasers — Bitcoin has been a bad investment on 190 of the 329 days so far this year (as of November 25, 2019). In other words, Bitcoin’s close price has been higher than the current price for roughly 58% of 2019 so far.
2018 is the second-worst year, with people who bought Bitcoin on 167 of its 365 days likely looking at a loss. 2017 had 53 “loss” days. (Bitcoin holders who bought prior to 2017 are still sitting on a profit; there are no “loss” days prior to 2017).
Exactly how many people are losing money at this price? Into the Block, a crypto data firm, estimates that 56% of Bitcoin holders would still make a profit if they sold today, 8% would be roughly even, and the remaining 36% would be taking a loss. That’s an estimate that’s based on the current Bitcoin price and the average purchase price of tokens held in Bitcoin wallets.
According to Blockchain.com, there are currently more than 43 million Bitcoin wallets. Extrapolating Into the Block’s data, more than 15.7 million wallets are currently worth less than what their contents cost. Of course, many Bitcoin wallets are inactive or lost, and plenty of people have multiple wallets, so the true number of actual investors currently looking at a loss is almost certainly quite a bit lower.
Although millions are likely affected, the losses won’t be severe for most. Over the 410 “loss” days, the median difference between the higher “buy” price and today’s lower “sell” price is just over $2,000.
But to have lost that much value, the wallet owner would have to be holding 1 BTC. According to BitInfoCharts, more than 90% of all Bitcoin wallets hold 0.1 BTC or less. Given that, most investors are likely looking at losses of less than $200. And of course, those losses are only realized if they actually sell at today’s price.
Whether this reflects a trend or simply a blip on the radar depends, of course, on where Bitcoin’s price goes from here. None of these numbers are cast in stone; if Bitcoin’s price were to rebound to even $8,000, the number of past “loss” days would be reduced to just over 300. If it were to climb back over $10,000, in-the-red days would be further reduced to around 150.