Bitcoin's bounceback déjà vu: The buy-and-hold case for crypto largely remains a fiction

financialpost.com:

The cryptocurrency bulls are back again. Bitcoin surged to US$44,000 on Dec. 5, its highest in nearly 20 months, marking a dramatic 150 per cent rise so far this year. After losing more than 60 per cent of its value in 2022, its climb back has sparked yet another wave of euphoric calls: industry veterans now project the token will breach US$100,000 by the end of 2024, and at least US$750,000 by 2026. Competitors including ether, dogecoin, solana and cardano are all up by double-digit percentages, too.

As with any instrument, the investment case for cryptocurrency hinges on finding a convincing narrative. But unlike other assets, bitcoin has no intrinsic value, nor is it backed by anything. Some may argue that gold is not much different. Yet the glossy metal has been trusted as an effective store of wealth for millennia, and has been shown to offer some protection in down markets and times of high uncertainty — living up to its status as a hedge.

The same cannot be said for bitcoin. Its most consistent facet is its inconsistency. What the cryptocurrency ultimately offers, then, is a chance to speculate on the market’s sentiment towards itself. And here the current pro-bitcoin sales pitch from its evangelists appears to be three-fold.

First, they argue, a “risk-on” mood has returned to financial markets. In recent weeks, investors have become increasingly convinced that the United States Federal Reserve has reached the end of its interest rate-raising cycle, and that cuts will happen sooner than it is signalling. With ample liquidity, and rate expectations lower, punting for something more speculative seems appealing. And rising bitcoin prices tend to generate a buying frenzy, which reinforces itself — until it inevitably