The 2017 crypto boom was undeniably a bubble that had all the characteristics of irrational exuberance. That doesn’t mean that the technology and asset class is doomed. We all remember what happened in the dot-com boom and bust cycle and how internet and software eventually took over the world just a little bit later and with clear winners that took it all (Amazon). As we can see in these charts and much like what is happening in the stock market indices, there is an alternation of currencies and many weak and overhyped projects or even good projects with underhyped incompetent marketing are no longer at the top. In our previous article it was discussed why altcoins belong to a well diversified portfolio and can outperform just holding Bitcoin during boom cycles such as in 2017. Here we explain some of the reason we think the time is ripe for a new boom and bust cycle that will eventually lead the market up. If you study the Bitcoin charts the market works in higher bubbles meaning that each time at the end of the bubble the price is higher and that’s normal for a speculative asset class like this.
1. The market is hungry for high risk
One of the most well known speculative investors is Carl Icahn, the legend himself. Little he knew when he sold Hertz stock just before the declared bankruptcy for a loss of 2 billion at a price of $0.72 per share. What happened later defies all logic. Speculators who increasingly use the Robinhood trading app drove the price NUTS reaching a level of $3.7 per share after the company declared bankruptcy. That is very similar to when back in 2017 prices of random small cap altcoins that were abandoned by their developers were pumped sky high by greedy speculators and 4chan pump and dumpers. Now that’s not a solid reason to enter the market but the point we are making is that a new boom cycle seems very probable.
2. Wall Street is at All Time High propped by the fed
Not many people realized exactly how much people have started to believe in buy the dip narrative. Especially US citizens more than the rest of the world have embedded in their minds that to preserve wealth you need to be invested (and it’s true). What this can mean is that the market is more forward looking than what it was in the past. What it also means is that investors don’t know where else to put their money. Interest rates are at an All Time Low. Inflation is probably going to hit stronger than before after Jerome Powell is openly stating that average inflation is the target. In a few words and as Ray Dalio is saying (preaching mostly): Cash is Trash. If you follow the rise and fall of Bitcoin it coincides with Wall Street because hedge funds need to rebalance when the market is going down and need to find alpha returns when the market is going up to justify their hefty fees.
3. Gold and Silver are proxies
There is correlation of Gold and Bitcoin and it is frequently referred to as digital gold although the narrative is somewhere in between electronic cash and store of wealth. I won’t go into the block size wars and narratives and lightning network prospects, that’s work for another article someday. The truth is that investors are trying to escape inflation and monumental money printing of $3 trillion by the time this article was written by buying hard assets like Gold and Bitcoin. Here is a nice podcast with the Winklevoss brothers comparing the two assets.
4. Bitcoin halving has a time delay
The mechanics of the Bitcoin halving are quite mathematical and complex but here is what history tells us: Everytime it happened Bitcoin reached higher during the following period. This time the halving coincided with one of mankind’s worst periods. Now that things are stabilized and there is light in the end of the tunnel people are becoming more optimistic.
5. Defi is exciting even to CFTC and Nasdaq and JPM
It’s not only that the crypto crowd is excited but also very prominent leaders of the traditional system. After years of denial, big banks like Goldman Sachs and JP Morgan are hiring digital asset directors cause they can’t miss out.
I’m learning about oil but I’m also learning a lot about crypto and in many ways, because it’s so revolutionary and so cutting edge, I’m spending a lot of time just learning how it all works in the ecosystem.Heath Tarbert, CFTC chairman
6. Joe Rogan & Jack are bullish
Title says it all really, but Square Inc is becoming a bombastic growth stock that is set to overpower big household names in the retail payments market. Square is extremely bullish about Bitcoin and Jack Dorsey the famous Twitter CEO is set to integrate it in the platform too. Joe Rogan is broadcasting to 200 million Americans how cool he thinks it is.
7. Digital currencies are inevitable
There is a trade war going on if you haven’t noticed and China wants desperately to win it. Their problem is that US controls all the world’s money and especially the money that oil trading is being done. What they really want is to make their project called Silk Road to trade in Yuan and make it the default back up currency. If they succeed it will be on of the first steps in becoming the dominant economy. They are much further ahead of this process and Digital Yuan will soon come into existence. US will not stay watching so inevitably they will too. What this will create is a hell lot of people having digital currency wallets and learn how to use them to transact money directly without the need of intermediaries. Then the concept of free sovereign money will start to emerge as a viable alternative. That was Bitcoin’s vision from the beginning after all.
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Disclaimer: The information on this site is for informational purposes and isn’t financial advice. We cannot guarantee that you will have the same results as we have nor can we guarantee that the information shared here is appropriate for you. This is not financial advice and not given by professionals.