It’s the $64,000 question.
Did we just witness US$64,829 as the historical high-water mark for bitcoin?
Some think so.
‘The Coinbase listing — the ultimate poacher-turned-gamekeeper moment — might have been the high watermark for bitcoin,’ says Neil Wilson, Chief Market Analyst at Markets.com.
Others, including The Rum Rebellion’s Greg Canavan, prefer to paraphrase Mark Twain: ‘The reports of bitcoin’s death have been greatly exaggerated.’
In case you’ve been living under a rock, last week Joe Biden gave a speech.
He mentioned something about a possible capital gains tax.
It scared the living daylights out of some traders with big, long positions in bitcoin.
Some futures contracts were unwound. And crypto tanked.
This was actually a tanking many crypto proponents have been waiting for.
Bitcoin’s been tearing it up for the best part of a year. It was just waiting for a sell-off catalyst. This has all the hallmarks of a mid-way dip seen in previous crypto bull runs.
The following shows what happened the year after the last three bitcoin ‘halvings’ — in 2012, 2016 and 2020:
There’s a distinct pattern to the previous two, right?
And right now, we seem right at that dip stage. Which, if going on the past two bull runs, could be followed by a dramatic explosion even higher.
It is this pattern that is causing analysts like Michael Venuto of Toroso Investments to predict we’ll see US$100,000 bitcoin by this New Year’s Eve.
Anyway, an important point to note here is the old saying ‘past performance is not a guide to future performance’.
Often this is a compliance requirement in the finance biz to ensure when you’re talking about a particularly flash share portfolio performance, you’re making it very clear it could all go to custard tomorrow. Because that’s how the stock market works.
In the case of bitcoin and cryptocurrencies though…
Past performance really, REALLY isn’t a guide to the future in 2021
As such, you could almost take the above chart with a grain of salt.
The entire crypto market has upsized and mainstreamed since those last two bull runs.
A whole raft of new factors are now in play.
Some obvious — like institutions getting in and the likes of Visa and Mastercard finally embracing the change.
Some factors are more opaque…like the now unstoppable trend towards decentralised finance that is now in motion…
If you go back to bitcoin, the current price action is hardly surprising.
After a massive run-up you’ve got some traders taking the excuse to cash some winnings. Then you’ve also got some other folks who are quietly taking this opportunity to buy.
For instance, NYDIG’s (New York Digital Investment Group) Head of Research Greg Cipolaro disclosed that their institutional investor client base has been ‘buying the dip’. In an email he said:
‘…the root cause of the sell-off had to do with investor positioning rather than fundamental news. Simply put, traders were overleveraged and positioned long, resulting in forced liquidations.
‘…institutional investors have had a “buy the dip” mentality during these risk-off events, suggesting increasing ease with handling bitcoin’s volatility.’
Interesting, given NYDIG’s customers are actually some of the world’s biggest insurers.
In fact, NYDIG have Ted Mathers — CEO of New York Life, the US’ biggest mutual life insurer with $700 billion in funds under management — on their board.
Why the heck would insurance companies be buying bitcoin — right as it’s tanking — you might be wondering?
Could it be they know something many fly-by-night traders don’t?
Forget the noise…remember the big picture…
There is something bigger at play here.
Bitcoin is only 11 years old. In asset terms, it’s a newborn. As such, the precise volatility we’re seeing now — and have seen from bitcoin in the last five years or so — is perfectly natural.
People are still trying to figure this bloody thing out.
But what many forget is this, says Greg King, CFA, CEO of Osprey Funds: bitcoin is ‘fixing a problem the world may or may not have known it had.’
This problem is bigger than digital currencies.
It’s bigger than money itself.
Over to Ryan Dinse to further explain…
‘The disruptive nature of cryptocurrencies is often compared to the disruption caused by the internet.
‘And in a way it’s a good comparison. After all, they’re both technology trends that changed what was possible for both consumers and business.
‘But in my opinion, the changes being brought about by crypto are more profound and more important than the internet.
‘I mean, I like a cheap T-shirt from Amazon as much as the next person but changing the fabric of global finance is probably the bigger deal!
‘The interesting thing though, is how similarly the adoption curves of both trends look right now.
‘Check out this chart from Remi Tetot:
Source: Twitter @TetoRemi
‘This is a log scale so take note that the Y-axis is growing exponentially (not linearly).
‘In other words, we’re all still very early.
‘In my opinion, you can ignore the doubters waiting for the next bear market. While there will be dips and corrections, it’s increasingly unlikely we see the huge falls we saw in the 2018 crypto winter.
‘In fact, the peak of this current cycle could be a lot, lot higher if we’ve still got a 1999/2000 dotcom-style boom to come!
‘My personal take is that, as long as we continue to see waves of adoption coming from institutional investors, then this outcome makes perfect sense.’
Put simply, it doesn’t matter if you’re a crypto buyer or seller right now.
Or you think bitcoin will slump back to US$10,000…
Blockchain world is coming, regardless
This is going to have specific implications on your money.
And not just your digital money.
Your savings. Your income from those savings. Your stock investments. Even your property and gold holdings.
We’re going to examine EXACTLY what those implications are for you in a special event we have planned for this Friday.
Whether you’ve been watching the crypto markets with interest, horror OR plain old indifference in the last few weeks…do be sure to tune in.
You’ll find what we’ve uncovered is pretty amazing…
Group Publisher, The Rum Rebellion
PS: In a brand new report, market expert Vern Gowdie warns of the dangers waiting in a post-COVID-19 world. Plus, he outlines the steps you should take now to protect your wealth. Learn more.