Why I Buy Bitcoin During Crashes Despite Calling it a Bubble
Bitcoin has continued to decline since my last video, only just recently jumping back up to the mid $8k's at the time of writing this. For many first-time investors, this is likely a painful experience and shows the harsh realities of investing (that there is risk involved, especially for cryptocurrencies).
A lot of people are confused as to why I still buy into Bitcoin despite calling it a bubble. This is because one is a bet on perception (when I buy Bitcoin) whereas one is a bet on reality (when I call Bitcoin a bubble).
Bitcoin adoption has been slow, with roughly 1% of transactions or less being used for actual commerce (I seriously doubt Bitcoin gets most of its value from the 'digital gold' argument either given it just lost 60% of its value in a month and a half). Many investors in this market are very emotionally driven and there is a lot of mob-like mentality and parroting of key opinion leaders. Almost always, behavior like this leads to bubbles. While we often cite the dot-com bubble, there have been many other mini-bubbles where people's perceptions disconnect from reality (e.g: 3D printer stocks).
This is exceptionally common in tech due to lack of understanding by investors, and this is even more extreme in cryptocurrencies due to its low regulatory nature and political ideologies skewing it toward a younger, more volatile demographic.
I continue to buy Bitcoin because, as stated in my previous description, I suspect that many people missed out on the meteoric rise of Bitcoin in the 2H17 and won't miss out on another pump if it occurs. This is based solely on perception, not reality.
Lastly, on the more practical side, I am keeping an eye on many altcoins in the event that their Satoshi levels come down to more attractive buys.
How are you playing this market and what are your thoughts moving forward? Thank you for watching / reading!
The imposition of regulations by governments should not surprise us. The attacks upon crypto at the Davos summit and the widespread attacks upon crypto in the mainstream media reflects the fear that the global elites have of a new technology that threatens their business model. The current crash in global stock markets reflects the rising rates in the bond markets which in turn threatens the world economy. When the world economy enters the next recession big money will rush for the exits from the stock and bond markets. Some of that money will go into gold and silver as it did in 2009-2010 and some of that money may well go into crypto as a long term investment in a new technology that holds major potential for making the world a better place.
You keep calling bitcoin a bubble yet fail to put its rise in value over 2017 in its proper context. World central banks have created billions in cheap money that has gone into propping up stock and bond markets both of which have achieved record highs due to this blatant manipulation of all asset classes . Some of the cheap dough has undoubtedly gone into crypto.
You should address the bigger issue of what happens to crypto when the world economy crashes. The current movements on global bond and stock markets are like the first tremors before an earthquake. They are warning that our current economic model that is wholly dependent upon cheap credit is nearing a major crash. Don't believe me look at the work of economic historians such as:
Jim Rickards -
https://jimrickards.blogspot.co.uk/
Dr.Paul Craig Roberts (former assistant secretary to the US treasury) -
https://www.paulcraigroberts.org/2017/10/18/greg-hunter-interviews-pcr-looming-economic-catastrophe/
David Stockman (Director of the Office of Management and Budget under Reagan) -
http://davidstockmanscontracorner.com/good-riddance-janet-you-were-a-colossal-failure-part-1/
Nomi Prins (former managing director at Goldman Sachs/Bear Stearns) -
http://www.nomiprins.com/thoughts/2017/12/31/the-next-financial-crisis-will-be-worse-than-the-last.html
Dr.Chris Martenson -
https://www.peakprosperity.com/blog/113721/its-looking-lot-2008-now
Very interesting post, thank you. I am quite new to the crypto world and would like to know your opinion on the usefulness of Bitcoin. Do you see the function in the future as something like being the crypto-gold or do you think Bitcoin will be eaten by alt-coins? I am looking forward hearing from you!
Thank you for your kind comment. I am a historian and have been studying crypto for a while now. Bitcoin was developed in reaction to the 2008 financial crash which showed that the current monetary system was no longer fit for purpose.As the chair of the CFTC has said without Bitcoin there wouldn't have been any blockchain. Bitcoin started this revolution in new technologies. Sadly, in our rapidly changing world you have to invest and innovate to keep up with the times. Facebook looks old and is in need of new ideas as Zuckerberg has admitted otherwise it will go the way of the dodo bird.
Bitcoin's core developers have sat upon their laurels and not been working to develop its potential. Of course, everyone mentions the Lightning Network as Bitcoin's saviour. Even when it is finally introduced it won't seolve all of Bitcoin's problems as Charlie Lee founder of Litecoin has noted.
Bitcoin has first mover advantage in its favour still. It is a household name. However, being first is not the same as being the best. Second and third generation blockchain technologies have come out that have improved upon Bitcoin.
You should pay attention to the so called Flippening whereby Bitcoin may eventually lose its dominant position in the crypto market probably to be replaced by Ethereum.
Check out this website on this subject:
http://www.flippening.watch/
Bitcoin is seen by many as crypto gold but I do not think this was the original vision of its creator see Bitcoin's whitepaper written by Satoshi Nakamoto:
https://bitcoin.org/bitcoin.pdf
The only thing I would recommend is do as much research as possible before investing hard earned cash into crytpo. Beware of false prophets who make all sorts of ridiculous claims for bitcoin/altcoins. One last thing try to have a varied portfolio of cryptos don't put all your money into just one coin.
Good luck and be careful out there in crypto land.
Have loved all your content and, on the whole, agree with your analysis. The one point I would disagree with though is that the bubble has not popped (or that bubbles instantly "pop" at all.)
Looking at the dot-com bubble, which I believe cryptocurrency most closely resembles, the peak of the market was in March 2000 and then there was a long downtrend until September 2002. There wasn't one clear, major trigger for the change in sentiment but sentiment seemed to change. We actually didn't see new highs in the Nasdaq until November 2014. (When all of the hype of the dot-com era had actually come to realisation 14 years on). The inflation adjusted Nasdaq only just reached its new high this January. (Michael Lewis' book Panic is amazing on this)
Other bubbles fuelled by wild speculation to consider: US Housing Bubble - Peaked in July 2006, bottomed out in Feb 2012 and finally reached new highs in Dec 2016. (Using CORELOGIC CASE-SHILLER U.S. NATIONAL HOME PRICE NSA INDEX)
The Japanese Asset Bubble: peaked in 1989, the Nikkei225 then fell until March 2009 and it's still never reached those previous highs. (Nikkei 225 has peak at 38000, today sits at 24000.)
I can't see new money coming in to the space until these coins / tokens have actual utility - all of my friends which i would imagine taking a gamble on this, have. The rest of my friends will only buy it if required to and some point in the future to actually transact. I think we've seen the point of maximum speculation and it is now a good idea to get out while you can. Because, using previous bubbles as an example, this could fall for a lot longer, to a point much lower. Given how long it can take bubbles to hit their lows, it can be particularly difficult to deal with psychologically if you lost a large chunk of your money AND had ample opportunity to get out.
The point of mass-adoption where I see new highs being set is also so far away. I'm from the UK and I can pay and receive money instantly for free using my bank account so this system is going to take a lot of beating. (I believe there is a delay in the US system). There are very very few people that are seriously worried about the centralisation of banks. Certainly not to an extent where they want to keep a significant portion of their wealth attached to a password or private key they cannot reset or retrieve from a customer support line if needed.
The whole of society needs to change to adapt to this new technology. In 2001 the sites of the dot-com bubble had to wait for high speed broadband, cheaper hardware and trust in onine payment methods to develop. Similar infrastructure changes and change of public mindset will be required for bitcoin/other cryptocurrencies to actually be used.
Keep up the great work. I find your opinions very useful when it comes to forming my own and I think your channel is one of the best i've found in this space.
You should be worrying about the mega bubbles in the stock market and bond markets. When they coming crashing down and that is only a matter of time then the whole world is going to feel alot of pain.
You really don't get why bitcoin was created judging by your comments. It was not created so that greedy people could speculate on its price. It is meant to be an alternative to the fiat money system that has failed the world so miserably and created gigantic debt problems that threaten the world economy with disaster.
You should read the blogs of Nomi Prins, former managing director of Goldman Sachs/Bear Stearns or David Stockman who was in charge of Reagan's budget department in the 1980s.
They clearly explain the dysfunctional nature of our current economic model that has created a situation where 8 billionaires own as much wealth as the poorest 3 billion people.
As Dr.Chris Marenson and Professor Michael Hudson have pointed out, this is creating enormous political volatility that has been responsible for the Brexit fiasco in Britain and the election of Trump.
Excellent post, I watch all of your videos but have been looking for different analysts because you haven't been posting frequently and the most serious ones share the same opinion as yours.
I do believe in cryptocurrency and its underlying technology, the main purpouse I jumped into BTC was because I wanted to see a world of finance without intermediates institutions biting a chew in fees.
The most promenient use cases for cryptocurrency in general are:
Store of wealth in the "cloud", eliminating the need for banks to store physical FIAT;
Fast reliable and cheap international transfers, which today not only are expensive but also slow because if you live in a country other than the US you can't simply transfer the money directly, let's say Canada to Brazil, you need to convert CAD to USD and then USD to BRL, leaving thousands of fees and spreads on exchanges, not to mention heavy government income taxes;
Abolition of credit card instituions (another man in the middle), for day to day transactions, this one will hopefully inprove the world economy as a whole, because if you don't know, MASTERCARD, VISA and etc charge percentages of EACH sell from the seller, turning this case scenario one of the best in adoption of cryptocurrencies, pushing the prices of everything down.
However, let's not forget that governments doesn't like the fact they can't charge income taxes directly from the storage and use of cryptocurrencies not do other financial institutions such as banks and credit card companies like the fact they will loose massive revenue as people start their transactions without them.
It is fine to enter this market for pure specullation aiming portfolio diversification and higher returns; however, if people knew the power they have in their hands right now, worldwide adoption of cryptocurrencies would make governments and other financial institutions to bow in front of us.
Hoping to see the day I'll be able to buy a hot fresh bread from the local bakery with cryptocurrencies. In the past they accepted cash only, in a few years it started to accept debit/credit cards, let's see how long does it take for them to start accepting crypto.
Love the comment about the stealth fighter + rain!
Cryptocurrency is powerful but so brittle; with the price driven largely by emotion such as fear and greed. At the moment, I use some of the new financial products such as Monzo or Revolut; they are fast, easy to use with quite tranparent fees and instant update to my account information. All driven from my cell phone.
Cryptocurrency is so far from this reality. Even Litepay (am a LTC holder) promises much and I hope it delivers in buckets but at the moment; it is just hot air.
My own financial well-being has been tested and Cryptocurrency make up less than 10% of my entire investment portfolio (incl. pension and equities etc.) but still, the last month has been a stomach-churning ride. Still, am dollar-cost-averaging across BTC, ETH and LTC with occasional dives into NEO when the NEO/BTC or NEO/ETH looks favourable. That's it.
Out of interest, what is your % allocation for Cryptocurrency when compared to your entire investment portfolio?
Keep the great content coming along.
Thank you so much for the content, I've been watching your videos for some months now, though this is my first time commenting in any platform.
Since I entered the market I've been very enthusiastic with everything related to cryptocurrencies. I really didn't understand most of what was the tech (try to understand the tangle for example... not the easiest thing), but I felt like buying in was a way to be a part of something new.
The discussions like is BTC a medium of exchange or a store of value. Is it both? Can any of them replace the current financial system? Can any be a part of it? Were absolutely fascinating to me.
Since then, my (very) diversified portfolio, which I kept until October last year (about 15 alts... NEO, QTUM, XRP and many others), I choose to convert to only 3: NEO, BTC and XRP.
The thing is, the more I read, the more skeptical I became (yeah, the tangle? Not really sure if anyone understands why it is so good), So I've started to get the impression that only speculation was moving the prices (which I've only confirmed with NEO and XRP).
Most of the alts I've had, I really didn't "get". Not technically, not as a business, not as a currency... you name it.
Now I only own 2: BTC and XRP.
I think this two have strong enough foundations, so I can actually see it as more than vapourware.
I'm trying to play as Richard Heart said, selling the bounces.
I am rebuying my positions when the dip reaches my order, but I think that the market, even after this red weeks is like... too much of a good thing.
There is more money in the market in general as it can be actually useful and until I see a much smaller number of altcoins with a much more independent price movement I don't plan to put new money on the market, nor to buy any more positions than I already own.
I don't doubt that it can go either way (a bounce into a new bullish cycle or more weeks (months) of a bear cycle) so I'm trying to play safe.
Things can change, but that is my opinion for the moment.
Sorry for the long post.
According to the firm Autonomous Next, the number of hedge funds investing in digital assets like Bitcoin has grown rapidly to more than 100. Since the launch of Bitcoin Futures on the Chicago Mercantile Exchange in December 2017, it shouldn’t be a surprise to anyone why the price of Bitcoin is down 50% from the high.
bitcoin.PNG
Only Retail Investors chase price and buy high and sell low, while the Professionals buy low and sell high. The Hedge Funds have purposely sold Bitcoin futures to get in a better price.
At the moment, there is a war taking place between the buyers (Hedge Funds) and the sellers (Retail Investors) called capitulation. That line in the sand was at $9000. Capitulation is when investors give up any previous gains, by selling, in an effort to get out of the market. Capitulations are outcomes that result from the maximum psychological and financial pain that can be endured by a group before throwing in the towel. The Retail Investors are throwing in the towel after seeing a more than 50% correction in the Bitcoin price to the buyers, the Hedge Funds. With 100s of millions of dollars to invest, we are witnessing an accumulation phase by the Hedge Funds between $6000 and $9000.
The Hedge Funds are loading up and buying from the Retail Investors. But to fill all their buy orders, as the sell orders dry up, price must go down to the next stack of sell orders. We are approaching what I believe will be the bottom of bitcoin at $6000. My first target is $12,000 and my second target is $17,000 over the next 3 - 9 months.
The easy money has been made over the last 12-18 months. With the big boys in the game now, the rules have changes. The question is, are you ready to play to win with a new play book?
This post is my personal opinion. I’m not a financial advisor. Do your own research before making investment decisions. By reading this post, you acknowledge and accept full responsibility of any gains or losses.
Again, another good video by you, and you’re very intelligent....BUT again, you still are not addressing so many factors when I comes to a “bubble“.... again, first of all we have 1/2 of 1% of the world being involved in crypto, and a very huge demand from many who want to be involved but don’t know how, are not able to, or they are not ready yet. This fact alone shows that it is NOT a bubble. Supply vs. demand simply states the fact! Very few fiat gateways. They are expanding rappidly.
Just this week on Robinhood, 1.2 million users are waiting in line to use it to buy crypto. The square trade app is already having similar results. Coin base is still the number one downloaded app, with nearly 1,000,000 downloads every week. There is a HUGE demand, but it is difficult to get in. Exchanges are blowing up with new users, so much so that it can’t even handle the volume. Binance for example opens up, and in one hour time. Gets over 300,000 new users, in one hour! Not to mention, the United States stock market alone has around $27 trillion. Worldwide CryptoCurrency Market Capitalizations $500 billion. In looking at the supply and demand ratio there, there’s no comparison. If anything is a bubble, its the US stock market for sure. Just imagine when there is an 8 to 10% marketshare in crypto currency, which is just the beginning, and it takes up to 40 to 50% participation and marketshare. The potential for crypto currency to even eventually hit $100000,000,000,000.10 years down the road is a very real possibility. At that point, yeah, I’ll call it a bubble.
Also, you just don’t seem to believe crypto currency as a whole. Philosophically, looking at the technology, the projects, etc., doesn’t seem to play much of a factor for you. As David Hay says, I believe that in the same way we use the Internet now to access information, we will eventually have the same phenomenon with The way we access money in crypto currency.
It’s funny that in your mind you actually said that “you hope you are putting people at ease with this video.” I think your videos do anything but put people at ease LOL... quite the opposite, my friend... you are really good at freaking people out, and I think you kind of get off on it and a weird twisted way LOL. no surprise that you said yesterday in your video that it “pisses you off when people say ‘It’s FUD’”.... because you are the king of “FUD”. LOL... The notion of crypto currency being a “bubble“ is total bullshit. Plain and simple. It is FUD! The news that you referenced yesterday is total BS, twisted, and the reporters feed into that big time. Most of the news articles were total bullshit, from China, to South Korea, and now India. It is FALSE REPORTING! It is spreads FUD! People panic, and get out. It just is what it is.
Sorry for being so hard on you, I actually love your videos I watch them every time, but you drive me crazy! You nailed it on the Bifinex and tether issue months ago though, I’ve stayed away from that ever since.
Well said. There are lots of positive developments in crypto which are just being ignored by lots of commentators. Take for example, the Brazilian government developing an app based upon the Ethereum platform for petitions to its congress or the biggest public pension fund in Canada investing in Ethereum.
Long term investments in good crypto projects will pay dividends and help make the world become a better place to live in. There is a new project out called Medichain which gives patients ownership of their own medical data in a secure way and gives specialists access anywhere. It will help boost medical research. How good is that.
He is saying that it is a bubble.
Let's take Investopedia's definition of a bubble.
"A bubble is an economic cycle characterized by rapid escalation of asset prices followed by a contraction. It is created by a surge in asset prices unwarranted by the fundamentals of the asset and driven by exuberant market behavior. When no more investors are willing to buy at the elevated price, a massive selloff occurs, causing the bubble to deflate."
We could argue all day, but most of the people that got into cryptocurrencies in the past few months, especially Bitcoin weren't driven by utopian promises to unbanked the banked or banked the unbanked but by the prospect of making money. I know when my roommate got in, he couldn't care less about the tech. He wanted the moon and the lambos. I think it is safe to say that it is a bubble, like almost all financial asset are. A bubble is just a market pattern driven by human emotions. But it hasn't popped. It probably has a long way to go.
I love Bitcoin, don't get me wrong. But if you look at it from a technological stand point it is probably overvalued. It isn't ready for the masses and nothing tells us it ever will. Time will tell I guess.
I watched the video and it didn't freak me out at all. In fact I found it reassuring that he was buying BTC in this dips coz I was too. BTC has changed the world by bringing blockchain to the world. We have oppened Pandora's box, it can never be closed.
I don't think we should get attached to any particular coin and just look for the ones with the best real world applications and uses. Bitcoin might or might not survive but crypto will dominate for sure.
Anyway, you bring up some great points and it feels like there is so much room to grow still. Definitely stay out of tether, you're right about that.
A worthy arguement, gets my upvote
You hit the nail on the head when you said that people who are invested into any Crypto are so much passionate about it that they will ready to fight with you or give unreasonable excuses to prove their point.
Two classic examples of it are Verge and Tron.
There is so much hype about these coins, that if you ever try to reason with people on these coins they will berate you and and treat you as if you know nothing. Verge is the stupidest privacy coin. They missed deadlines on implementing features which were there in top privacy coins since inceptions.
I also dont blame people for defending it. Most of the youtube channels are paid to promote specific Cryptos. an insane example of this is Electroneum. anyone understanding the basics on mining and tech involved, can go through their white paper and point out the deep hole in it. Yet, did it stopped passionate Electroneum investors into sending in it. NO. Recently one Reddit user found issues in their code. Instead of acknowldging and accepting that mistake, Electroneum community started bashing that user. This is not how normal tech operates. even big companies like Microsoft etc, do a Beta release so that selected users can do testing, point out issues and provide feedback for companies to work on.
There is absolutely no feedback mechanism in Crypto industry. Atleast for most of the Cryptos.
I don’t consider it a bubble because we’re looking at it like a stock or commodity. Bitcoin is neither, it’s a network. When pricing networks you can’t use the same comparisons because networks aren’t linear their exponential. This means for every new person that enters the network, the value increases exponentially. Crypto had massive adoption last year and will only continue to do so over the coming months and years. Look at it like a binary play. Crypto is either going to go bust or to the moon. In the meantime volatility is the name of the game!
There is one intriguing thing about this network though. Theoretically all the current transactions holders could lose access to their private keys and thus negate the value of the network. In fact, the more centralised the network becomes and the longer you wait, the lower the overall value of the network and it will slowly die out. This is assuming that no new tokens are created (which is still some ways off based on halvening times). What do you think?
Haha. Yes that's entirely true! Once the tokens have all been mined then I would expect bad things. That's why I personally invest in Steem. It's an inflationary token that will be mined at a long-term inflation rate of .95%. On top of that we have this and other social networks backing it up. So, there is some time left for bitcoin because I'm not sure too many people even understand your point and like you said we still have some years before this becomes an issue. Thanks for the comment. Any thoughts on Steem? Would love to hear. Mainly negative if possible. :-)
I 100% agree with you that the value of cryptocurrencies comes from network effects. However, there is also a force that counteracts that namely scaling (or the lack of it). Yes, for every user the value squares ("Metcalfe's law") but also for every user the network value decreases because of network congestion albeit not as much.
On a side note: That's why IOTA is interesting to me because counterintuitively the network becomes faster the more users join (not shilling, just arguing from a technical standpoint).
Adoption coming in so far has been the highest it's ever been, however, the rate of change of this phenomenon is nowhere near a justifiable correlation compared to the price action that we have been seeing over the past few months. As CI says, most people who even use crypto right now is using it solely for the means of speculation, and nothing else. Your argument of adoption is flawed and invalid.
I agree that adoption doesn't fully justify the price action. I believe what was more likely is the creation of the derivatives market and allowing strong hands to push everyone around. To me that makes more sense. But, I don't think the people doing it want to kill the market, they just want to cash in. This in my opinion, means the short trade will reverse when there are massive profits to be made. They're too greedy to kill the cash cow. They are just in the business of fleecing. Also, on a personal note I don't own andy bitcoin. I'm invested in Steem mainly because of the social aspect of the coin and the fact it has many great technical features. Steem has held up really well over the past 90 days when compared to bitcoin. What's your opinion on the future of the Steem blockchain? Thanks for your comment!
Valid point, using that kind of logic I can't really say that one school of thought is better than the other especially in the kind of market we're in. Only 1 way to find out...
STEEM is great, one of the few coins with a value that has the greatest ties with its objective value tbh. Im currently in the process of trying to buy some but my exchange isnt cooperating with me at the moment because flash crash and all -_-
It didn't really have mass adoption the past year though. Yes, the awareness increased drastically but the use of them really didn't increase nearly as much as it might seem given how much volume and new addresses are from pure speculators. Most of these folks, including myself, aren't using Bitcoin for payment processing. Also important to note that most bubbles can be discovered just by looking at the psychology of the participants in the market - and the behavior here is as bad as it gets.
I think so. The behavior is aweful for sure. Mainly because most people investing are here to get rich quick. Seasoned investors are still skeptical. It may be a bubble but it’s much less bubblishis at this prices. The underlying issue is do you believe in the technology. If so, then good buying opportunity, if not then you probably shouldn’t be investing at all. I personally don’t like bitcoin long term and have invested into Steem to get exposure to the crypto market. I will be keeping an eye out for any better opportunities in the future but for at least the first half of 2018 I’m going with Steem.
Described like that it's a decentralised Ponzi
It’s a speculative market all the way. New new money to prop up old money. But, I wouldn’t call it a Ponzi because it’s not fraud. It could be a bust but still wouldn’t call it a Ponzi. BitConnect on the other hand...that was a Ponzi!