“Whom the Gods Intend to Destroy… They first make mad.”
Bitcoin is either the greatest thing ever, or a complete Ponzi. Take your pick. The Shills cite multiple reasons its going ever higher. It looks to be in the speculative mania phase – joining a long and distinguished list of scams that sought to draw in the greater fools. While some target $750k, the price history may suggests $25,000 as a more realistic entry, and even that could be unsustainable if the euphoric bubble finally pops.
I can’t wait for Bitcoin to not hit $100k. By writing that I guess I’ve ensured it does. The trickster god who sits upon my shoulder will make sure of it.. he feeds on my financial disappointments….
Don’t worry. This is not another complex Blain rant explaining why bumble bees can’t fly or how Bitcoin isn’t actually worth anything. Bumble bees defy Newtonian laws in a similar way to Bitcoin defies financial gravity. Since neither can exist – but both do… its simply easier to accept them both as proof of easily amused gods. So let’s all just accept Bitcoin is real, its investible, and if you want to risk losing your shirt.. be my guest.
Last night I read about a prominent Bitcoin – let’s call him a promoter because shill is such an ugly word. He said he is massively positive on BTC because so many people remain negative. Contrarians always interest me… But he’s got an axe. He’s one of the billionaires who’s been building his wallet from the twenty-teens when the pixelated nothingness was worth a couple of hundred dollars. He is still propping it at $100,000…. Because “it’s far from being a bubble.” And he reckons it’s going to $740,000 as “regulatory headwinds turn into a tailwind”. That last bit appears to be true.
Of course, Bitcoin is anything but a traditional bubble. It’s gone well beyond the bubble stage. Some of the “smartest” minds in finance are now believers. Maybe I’m too stubborn and stupid, but I would now characterise it among the great financial speculative manias – Dutch Tulips, The South Sea and Louisiana bubbles, Railways Stocks and Dot.Coms. All such speculative manias are much the same; they require the suspension of disbelief, the acceptance of this time it’s different… (the most dangerous lie in finance), fear of missing out, and listening to the funny old chap with the tail, the horns and red face sitting beside your ear.
They all end the same…
My gut feeling is Bitcoin was once an intellectual curiosity, but it’s been hijacked by its own success. The activities of promoters pushing BitCoin narratives have elevated it from mere speculation into a Mass Delusional Ponzi-Scheme. It is entirely reliant on repeatedly sucking in the greater fools – but that’s just my opinion. Other opinions are available – and I urge you to think and examine them for yourself. (Regular readers will know I don’t believe in Bitcoin, but I’m happy to trade it – and I will share my strategy below. (It was doing OK till I called the US election 100% wrong.))
Famously there is BitCoin uber-sage, Michael Saylor of MicroStrategy who was having a fantastic post-election run, his stock up 120% (at one point.) It slipped after he had a bit of “Ratner’s” moment saying: “We’re making $500mm a day selling $1 bills for $3, a million times a minute. If you don’t like Bitcoin you don’t want any piece of it. If you like Bitcoin this is a monster for you.” Nice marketing, his stock symbol is MSTR! And notice his key marketing ploy was FOMO – if you don’t like Bitcoin, you are missing out!
Saylor is all-in on Bitcoin. There is a very interesting article in Forbes this morning on MicroStrategy – How Does MicroStrategy Use Bitcoin to Make Money? Worth a read. To quote Forbes:
- “The genius of MicroStrategy’s strategy lies in its ability to use the inefficiencies of legacy capital markets to gain leverage over fiat. In simple terms, it borrows cheap, inflating capital to acquire a scarce, appreciating asset. Of course, this strategy assumes that bitcoin’s long-term success is inevitable. If bitcoin were to fail, MicroStrategy’s entire thesis would collapse.”
- “By converting inflating fiat capital into deflationary digital capital, MicroStrategy’s treasury operations look like the early stages of a speculative attack on the U.S. dollar.”
- “For bitcoin to fail, hundreds of millions of people would need to wake up and decide that they all agree to abandon it.” [That’s not how speculative bubbles usually pop.. they burst when ethusiasm wanes and they are exposed.]
Or, you could read some “reputable” bitcoin research, like Bitcoinist’s how quickly it’s going to $1 million.I reckon it will be just as good as anything else on guessing where BTC is going next. It’s probably full of stuff about the future halvings, institutional acceptance, its emergence as a valid asset class, interest rate cuts, scarcity vs demand, corporates buying Bitcoin to hold on balance sheet, reserves, sovereign strategic bitcoin reserves, yada, yada, yada. (I wouldn’t actually know. I didn’t actually read the article. I didn’t have to.)
I can predict the article will most definitely say Bitcoin halvings always trigger massive bull runs. Really? There have been 3 previous halvings, and they passed unnoticed in 2012 and 2016, while the May 2020 halving was early in Covid and months before the autumn rally began in earnest.
If it’s an honest article about Bitcoin it should really say something like.. “we’re confident Bitcoin is going higher because:
- We’ve been talking 24/7 about the halving on every single podcast, filling every second and slot of available ads on Zero-hedge and such, and tweet-bombed every incel, crypto-zombie and young man who has ever heard about Bitcoin. We’re riling them into a religious frenzy about the halving upside till speculation becomes nailed on fact”.
- We’ve told everyone the whole of Trump multiverse is bought in, and therefore crypto will be favoured and double, triple and more in value.
- We convinced the next cohorts of greater fools they although they are late to the game BTC is definitely going higher because we’ve told them the 49% of the smartest Americans are now bitcoin believers, as is your local pension, savings, bank, and hedge fund manager. We’ve told them it so many times it’s become a fact.
- We’ve asked them if they are smart or stupid.
Not everything is crypto-world is a scam – but I suspect Bitcoin has become one.
I am very interested and intrigued by blockchains, tokens and even NFTs… they excite some genuine intellectual curiosity as to where they could lead. I can see Tokens becoming an increasingly important part of investment infrastructure and access. I’m particularly interested in Tokens as key to an evolved global foreign exchange market where the exchange rather than trading of digital currencies could become the norm.
But Bitcoin? Once intellectually interesting and elegant. Now obsolete – go find the post about how if everyone tried to sell their bitcoin at the same time, it would take about 50-years for the blockchain to process and clear every trade! Many say Mining should be banned because of its utterly pointless power consumption. Problem is.. it exists and if people believe in it we can’t uninvent it.. So how should you trade it?
The fractile nature of Bitcoin pricing
There is a curious fractality to the optimism and belief structures that underly Bitcoin. When it began nearly 15 years ago, the first paisley-patterned fronds of crypto prices were infinitesimally small. When a bitcoin was worth less than 0.001% of a $10 pizza, there were crypto innovators suggesting it could go as high as $1! Later some reckoned $10, and after that a few extreme cryptologists drew interesting formula on whiteboards to justify even $100.
Since then we have seen Crypto go stratospheric.. but in the same pattern… a sudden rally, then slide, before an even bigger rally and slide. Each time the highs are ultimately higher, but critically the lows are also higher. Take a look at the crypto price curve since inception very carefully. It’s only really staged 5 real price waves. (And since I have better things to do that gaze lovingly at charts of Bitcoin, these are kind of rough..)
5 Bitcoin Waves:
- The long 4300% rally from, let’s say $500 in 2013 ,to its first peak at $19217 in December 2017. (Let’s call it The Adoption Rally)
- It then slumped into a three-year range-trade some 50-80% below the peak.
- It then rallied 500% from late Sept 2020 to the new March 2021 top around $61190, where it bounced for 6 months. (The Covid/Meme Rally)
- It then slumped, again into a range 75%-50% below the peak where it stayed for 2 years.
- Since October 2023 it’s rallied a further 220% to test $100,000K. (The Trump Rally.)
What did we learn from these rallies? During the Adoption Phase we learnt for the first time, but I suspect not the last, that Crypto early adopters were terrible show-offs, bragging about them being rich and us staying poor. The Covid Rally was interesting – coming as winter set in and restrictions remained in place, it persuaded bored incels et al to start playing in Bitcoin, even as they played in ridiculous meme stocks. The Trump Rally is founded upon a fundamental belief (magnified by the shills) that Crypto was held back by bad government regulation, and Donald Trump is set to free it. (My guess is Trump will be persauded to backpeddle on crypto “freedoms”, but it will come back to the fore in 2026.)
Strip away that noise, and actually look at the numbers. Do some mathematical jiggery-pokery with the ratios between highs and the lows .. and lo and behold, some patterns start to emerge – most tellingly that the magnitude of both Crypto Slumps and Crypto rallies are within a few points of each other.
If the fractile nature of repeating Crypto price patterns continue… the I would guess the current rally will be followed by a slump to around $25,000. Which is where the market will languish for a while before kicking off a new rally to a higher high, probably around the time of the US mid-terms.. which might see yet more crypto promises banded around.
Or the bubble might pop, and I can sell you a second hand shirt to cover your nakedness…. Oh how the pernicious gods will guffaw!
Out of time, and off to do the day job…
This article was originally published in Morning Porridge and is republished here with permission.
