From zealous followers to staunch naysayers, no investment splits the room like Bitcoin does. Yet, its wider adoption is morphing cryptocurrencies into a barometer for the broader economy, according to Michael Bogoevski of CMC Markets
Since Bitcoin emerged as the world’s first cryptocurrency in 2009, the digital asset has navigated wild swings in value. It surpassed US$100,000 for the first time in December, but only two years earlier, investors felt the wrath of its volatility when they nursed a 64% year-on-year loss.
Perhaps no investment can split a room like Bitcoin can. Proponents have praised the cryptocurrency’s outsized returns since inception, while its revolutionary promise has cultivated a cult-like following. The naysayers, however, bemoan its volatility and association with illicit activities, with many advocating for increased regulatory scrutiny.
“Show me a major technological innovation throughout history, and I’ll show you debates about its utility and potential,” says Michael Bogoevski, Head of Institutional Sales, CMC Markets. “Changes in technology, whether in communication, transport, or money, will often divide the crowd. They don’t come around often, so it’s easy to underestimate them. Sometimes the technologists are right…and sometimes it’s the sceptics. That’s the investor’s dilemma.”
Despite their divisiveness, cryptocurrencies are increasingly becoming a mainstay for some governments and corporations, which are beginning to store digital assets within their treasuries like gold or dollars. Governments collectively held 513,800 Bitcoin as of January, according to BitcoinTreasuries, a website that tracks digital assets held at government and corporate levels. Demand for Bitcoin exchange-traded funds offered by institutions like BlackRock and ARK Funds also grew in 2024.
No headline was perhaps a greater boon for cryptocurrencies than Donald Trump returning to the White House. Since his victory over Vice President Kamala Harris in November, investors have poured over US$12 billion in net inflows into US Bitcoin ETFs. During the election period, CMC witnessed a significant rise in cryptocurrency trading activity among its clients, particularly on U.S. election day as Trump’s path to victory became clear.
The US President-elect’s plans to build a national stockpile of the world’s largest cryptocurrency lifted Bitcoin’s value to nearly US$108,000 in late December, helping the asset class to seven consecutive weeks of gains – the longest such run since 2021.
The logic of bitcoin’s volatility
“One way to think of Bitcoin, broadly speaking, is as an emerging asset class,” says Bogoevski, who emphasises the importance of staying level-headed when evaluating the asset. Its trajectory, in Bogoevski’s view, will depend on how markets, institutions and broader society choose to adopt Bitcoin and integrate it into the financial landscape.
“Even if you don’t invest in Bitcoin, its price action can offer valuable insights due to its correlation with crises, liquidity, and other markets, like the technology sector,” he says. “Remember, the majority of activity is through the OTC (over-the-counter) market. There is no central trading venue yet other than using vehicles like ETFs (via the US CBOE and Nasdaq) or futures (via the CME),” Bogoevski says.
Cryptocurrencies are exposed to greater swings than traditional equities, largely because they are less liquid. They lack the market depth and institutional order books that support major S&P/ASX 200 stocks, such as mining giant Rio Tinto or the Commonwealth Bank of Australia. When Bitcoin jumps 5%, the average change of the S&P 500 is 0.42%. A 5% dip for Bitcoin typically equals a loss of 0.67% for the S&P 500, underscoring the need for sound risk management around digital assets.
“Things can turn quickly. Cryptocurrencies have the highest volatility index of all markets – more than gold, FX, oil and bond markets,” Bogoevski says. “That indicates you need to be highly cautious when investing and trading in this market.”
The final stages
Global markets have soared in recent times, driven in part by an AI boom that has raised the valuations of the so-called “Magnificent Seven” technology stocks. Yet, central banks remain fixated on delivering a socio-economic landing and easing cost-of-living pressures for inflation-weary consumers.
When the US Federal Reserve signalled in December that it would slow the pace of interest rate cuts throughout 2025, thus keeping borrowing costs elevated for longer, markets commenced an adjustment process during a seasonally choppy period that often goes all the way to March.
Other headline risks, including conflicts in the Middle East and Ukraine, alongside unemployment figures and high inflation numbers, continue to pepper the airwaves, leaving assets like cryptocurrencies vulnerable to economic shocks.
“Bitcoin is still in its infancy, so there is risk around the volatile nature of this market. Anything that goes up 50% a year, the down-draft is just as possible as the upswing,” says Bogoevski.
CMC believes that global markets are entering the “final stages” of the current business cycle. For Bogoevski, historically, the final furlong has generated windfalls for investors and traders, but he cautions that nascent investments like cryptocurrencies are prone to high doses of euphoria.
He highlights the importance of staying vigilant and knowing when to go against the herd and reduce risk in portfolios, even during periods of market strength: “2025 is one of the most important years in the business cycle… the last leg of the cycle is the hardest. It attracts the most fervour and headlines. This euphoria can distort your perception of risk.”
Whether you are a lover or a hater, Bogoevski says, it is important to maintain neutrality when trading cryptocurrencies and not let ideology cloud your judgment.
“Believing that something will succeed or fail is often a recipe for disaster in investing. So too, is thinking that the market aligns with your perspective and is ‘listening to you’. As an investor or trader, it’s crucial to approach Bitcoin with an agnostic view.”
Disclaimer: Crypto is unregulated, high risk, and complex. There are no financial services regulatory protections. FOR MORE INFORMATION, HEAD TO cmcmarkets.com/en-au. Seek independent advice and consider the relevant Terms and Conditions at cmcmarkets.com/en-au when deciding whether to invest in CMC Markets products CMC Markets Stockbroking Limited (ABN 69 081 002 851, AFSL No. 246381).
