Bitcoin Lacks ‘Economic Anchor,’ But You Should Not Worry: Here’s Why

The situation is quite intense right now in the cryptocurrency market. Bitcoin has lost 50% of its value since November. This isn’t unusual for a cryptocurrency; it went through a similar slump from April to July 2021, and then immediately recovered. From a statistical standpoint, Bitcoin appears to be a high-volatility asset with no clear medium- or long-term trending or reverting patterns. It’s not a completely random walk in which the future path is unaffected by previous price fluctuations, but it’s closer than most major assets. Bitcoin Lacks ‘Economic Anchor’ Due to its volatile nature and the market-wide correction in crypto, there has been a lot of criticism going around regarding digital assets (especially Bitcoin), all over the internet. The recent one came from Nassim Nicholas Taleb, author of “Black Swan”, who sent out a tweet that went viral. He said: “For a contagion-driven asset with no economic anchor such as #BTC, a falling price does not make it ‘cheaper’ and more attractive. A falling price makes it less desirable [and], paradoxically, more [expensive]. Why? Because the price is its only information.” This is not the case experimentally over the brief history of Bitcoin. Buying Bitcoin when the price was falling was just as appealing as buying it when the price was climbing in the past. Taleb, on the other hand, presented an economic claim rather than a statistical one. So it doesn’t matter if BTC holds the ...