Institutional investors new to the cryptocurrency space may have been surprised by Bitcoin's recent volatility, which has exerted downward pressure on its price, according to crypto entrepreneur and investor Anthony Pompliano.
During an interview on CNBC’s Squawk Box, Pompliano stated that Bitcoin (BTC) experiences drawdowns of 30% or more approximately once every 1.5 years. He noted that these downturns are familiar to long-term Bitcoin holders, but less so for those recently entering the market from traditional finance backgrounds.
"Over the last decade, Bitcoin has drawn down 30% or more 21 different times," Pompliano said. "So Bitcoiners are used to this. Now, who’s not used to this are the people who are coming from Wall Street. They’re not used to this type of volatility."
"These new people are very, very fearful. We’re going into end of year. There’s things around bonuses people are trying to figure out, should I actually sell this asset that I thought I was really excited about? And I think that’s putting some downward pressure on the price."
Bitcoin Sell-Off Primarily a US-Based Phenomenon
Matthew Sigel, head of digital assets research at investment manager VanEck, commented that Bitcoin's recent sell-off, which saw the token drop to lows around $82,000, was "overwhelmingly a US-session phenomenon."
Sigel attributed the decline to tightening US liquidity and widening credit spreads. He explained that fears surrounding large-scale capital expenditures related to artificial intelligence collided with a more fragile funding market, contributing to the price pressure.
Crypto Volatility as a Driver of Price Increases
Bitcoin's price volatility has surged over the last two months, reaching approximately 60 as of Monday. This increased volatility can trigger significant market movements in both directions, according to Bitwise market analyst Jeff Park.
Pompliano emphasized that for those experienced in crypto, volatility is understood as a strong indicator, and not necessarily a negative.
"It’s not a negative. I would be worried if Bitcoin's volatility essentially was zero. You need volatility for the asset to go up."
He further elaborated on Bitcoin's historical performance, stating, "You know Bitcoin is up 240x over the last decade. It’s about a 70% compound annual growth rate. We are not going to continue to have that level of growth moving forward."
However, Pompliano expressed optimism for the future, suggesting that a compound annual growth rate of 20-35% over the next decade would still lead to outperformance compared to equities. He believes this potential for strong, sustained growth is why many Bitcoin enthusiasts view it as a valuable portfolio asset.