What Goes Up, Must Come Down! (Similarities to 1998?)

in bitcoin •  last year

As was noted yesterday, Bitcoin continued it's impressive run. 

On the way to record high after record high. 

However, something happened today that changed things for Bitcoin, at least in the short term.

This morning Bitcoin surged yet again, climbing all the way to just under $2800 per Bitcoin. 

Soon after, the price rolled over and then the bottom fell out. The price dropped more than $400 in a matter of hours. 

Briefly breaking the $2400 mark and trading down in the $2300's.

Right now the price is clinging to the $2400 price point undecided on where it wants to go next. 

Drops like this are scary for anyone, and reminds me of some of the things we witnessed in the late 90's as part of the Tech bubble.

Brock Pierce (managing partner of Blockchain Capital) agreed with my thoughts and had this to say:

"It feels like 1999 right now. We may end up having a similar outcome. We could really see a big correction here."

I think a lot of people feel that way, but the question has always been from what level will that correction take place?

That comparison to 1999 was very interesting and got me looking at a couple of charts to help better understand what part of the bubble we might currently find ourselves in. 

This is a good timeline of some of the major events during the Tech boom.

Comparing this with a chart of Bitcoin, what price point might we be at today?

After looking at the charts a bit, my best guess is that we are somewhere around the 1998 pullback. I circled it in red to help highlight it:

As you can see it was a pretty significant pullback that happened after a pronounced move up. However, take a look at what the price did afterwards. 

It continued to make higher highs and the entire index eventually went on to more than double from that level. 

So, yes this dip is scary and it very well might not be done yet, however, my best guess is that the moon shot in Bitcoin and the crypto space is far from over. 

Brian Kelly of BKCM (and CNBC) had this to add:

"There is no question we are in the middle of a price frenzy. There will be a correction and it could be severe, but it's unclear if that correction will start from current prices of $2700 of from some place much higher."

I think he shares the thoughts of just about every cryptocurrency investor I have talked to out there. 

The traders all think we are due for a correction and the technology geeks think we have much much higher to go. 

The truth probably lies somewhere in between.

Which part of the cycle do you think we are in?

Is this the "Bear Trap" or the "Bull Trap"?

Stay safe out there my friends!

Sources:

http://www.cnbc.com/2017/05/25/bitcoin-surges-10-percent-to-all-time-high-above-2700.html

Image Sources:

http://www.cnbc.com/2017/05/25/bitcoin-surges-10-percent-to-all-time-high-above-2700.html

http://bellaj.freehostia.com/index.php/2017/03/15/analysis-the-blockchain-mania-and-the-dot-com-bubble/

Follow me: @jrcornel

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Yes, the BTC move went especially parabolic this week. Anyone not expecting a hard pullback is in la la land. The real question is how price will play out over the next several weeks. There are a few key levels to hold, honestly, it could pull all the back to 1500 and hold that support and I'd still feel good about it's long term price action.

As for STEEM, the .00040 level is important as it's our most recent established support on the uptrend. Holding that while everything else is falling would be positive for steem.

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Yep I agree. It is import psychologically (and earnigns wise), that steem hold it's dollar support levels as well. If Bitcoin is falling hard we don't want Steem falling in unison or just a little bit slower...

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hmmm.. relax.. breathe in .. breathe out
it's not time to sell - intel says but we'll see :D
though it has dropped $400 - isn't this still normal? :D
crypto drops and ascends in $100s - I mean BTC and a few does too
I thought it's normalcy .. it's climbing again ..
maybe - slippery road ahead it slipped :D

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I am hoping it is just a garden variety pullback, albeit bigger than most in dollar terms.

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I hope so too :)

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Very true. I decided to watch it against the BTC for now since it kind of dictates the outlook for crypto space, for the time being atleast.

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Yes it does. Good point.

Didn't you get the memo that you're only supposed to cheerlead price rises? You're not allowed to say these prices have to come down.

I'm only being facetious because, before the $400 correction this morning, I made a similar post, which ended up having the worst view/upvote ratio of just about any post I've made.

I've seen enough bubbles to know what happens when a price chart starts to look like a hockey stick.

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I read through the post you mentioned and saw a comment about silver. I think silver is vastly undervalued at current prices. I remember when silver was approaching $50 back in 2011. At that time everyone and their mother was heading down to the LCS to pick up some silver. I am sure many sold off when it was bleeding not long after

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Yea I have been getting some family members into silver for a few years now. I think they did most of their buying around the $13 level. At some point Silver will have it's day in the sun again.

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It's one of the most undervalued assets in the world in my opinion! Once the criminals over at the LBMA get exposed it might (hopefully) break free. Until then, they will continue to dump paper on the markets to suppress the price

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Yea, people don't want to read downers... although I am hoping this isn't the second trap and hoping it is more along the lines of the first one! Which would mean in a round about way, I am still cheerleading ;)

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If I had to guess, this is just a profit-taking correction, and the price will continue pumping a while longer. But don't listen to me, I'm not a trader.

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That is my guess as well. My crystal ball is a bit hazy as well though, so it's just a guess :)

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"people don't want to read downers " I feel like this is especially true for steemit, almost all posts I see in the "hot" category related to crypto-currencies and/or steemit are definitely biased and unjustifiably optimistic for the future of steemit (and other cryptos). Not much objective analysis going on there

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But you can't fault them completely because the positive posts in some way actually do help the community too, keeping the enthusiasm alive, attracting new users etc. So this "positive" analysis may work like a self-fulfilling prophecy ;)

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That is a great way to look at it! Nice point :)

Is this the "Bear Trap" or the "Bull Trap"?

Markets are fractal so it could be both at the same time: a bull trap on the way down from the heights of a small bubble nested in the rising slope of a longer term larger crypto bubble. In retrospect, it seems like the Bitcoin bubble and crash of 2013 were the "first take off" and "early selloff". But back then, it felt already like the bubble and crash of 2011 were playing this role. And in a few years, it will seem that today's bubble and upcoming crash were the real "first take off" and "early selloff". And so on, until the music stops for good at the top.

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Great comment. How close (or far) are we, do you think, from the music stopping?

Somewhere in this range

Realistically I think here

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Haha clever! Yes that is my thoughts as well.

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Media attention is just now coming..

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Yep. The naysayers can say, well that was it, that's all she wrote. Meanwhile the believers can load up on discounted prices.

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Or the people who panic sell at the first sign of correction. They are usually the ones who bought at the top

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Yep, it makes people do strange things when they start to lose money...

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The emotions start to mess with people! You live and you learn, right?

I guess, to answer you last question, that we are in the Institutional Investors phase right now with Steem and, with Bitcoins, I would have to say in the Public domain of Media Attention as it is on the rise all over the world.

Great article and I really look forward to seeing what is going to happen with Bitcoins and, even more so, with Steem as I believe there is so much more potential with STEEM... Time will tell us all. Namaste :)

The LOG graphs show, that today we are yet so much behind the LOG scale trend of the first four years. Otherwise we should see BTC between $2 and $20 mln. Yes, sound absurd, but... that what the growth trend on a LOG scale was telling me 3-4 years ago:

Maybe, the Bitcoin price has simply lost the LOG trend, and will never come to that again? Who knows.

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Or maybe it will test that line and attempt a re-enter at some point?! ;)

We are just around media attention. But someone forgot to add, cashing-in on this chart. TIme to buy :D

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Yes, if we are just at that first major dip point. That means the price still can easily go up many times from here.

For the longest time, bitcoin has sold on exchanges at prices far higher than the main exchanges. Those of us who know that know that Bitcoin is bull and some people don't seem to remember, Bitcoin hit $11,000 just before Mt Gox. Bitcoin is bull for the future and love your post my friend @jrcornel (I hope I am right!) ;oD

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You make a great point here. In fact that is part of the reason for some of the rally. When the markets with the heaviest trading volume are trading at different prices, all other markets eventually get dragged to their price points. Bitcoin had been seeing it's most trading volume in Asia as of late. The price over there was also about 10% higher than on US exchanges. They were pulling up the price of Bitcoin in a way.

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I noticed what you say and it was like when I bought Bitcoin yesterday on Coinbase. It was a hundred dollars higher than at Poloniex. Then I bought. It dropped along with all the other coins I bought. Then it bounced to $2698. Meanwhile, it is selling on places when one person suggested I buy it at $3,000 to $4,000 dollars. I did not buy it there but for some reason many exchanges get away with selling Bitcoin at double the price or near that and they always have got away with it.

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They get away with it for a while, but eventually enough people play the arbitrage game that it closes the gap and the prices all gravitate towards the exchange where the most volume is taking place.

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Here is what you do not understand - I just talked to a guy today who had no idea what it was and will never understand it. I had to spell Bitcoin for him so he could look it up on his computer if he did that. Yesterday, I talked to three that stopped by my house and they had heard of Reddit not Steemit and they knew nothing of Steem or Bitcoin. No one know s about it except the very few my friend @jrcornel and most never will know about it nor will they care.

Bitcoin coin is going to be a exciting ride, I will be enjoying all the ups and downs. Even though some of the downs might make me sick.

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Keep a paper bag handy!

It will go back up. Wealthy Chinese still need to get their money out of China.

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Yep, and India as well as several other major countries haven't really gotten involved in a major way yet. This rally was mostly driven by parts of Asia.

Just over the last few days I cashed out 70% of my positions in Crypto. We are def going to correct but I feel like this is far from over. I am looking for a nice correction of approx. 50% in most coins. One thing is drastically different from crypto currencies not the crypto assets but the actually currencies like Bitcoin and Ethereum is that there is no price to earnings cap like in the Dot Com Implosion. Just like in Steem the more users the more demand for the network token. There's no earnings ratios rather its like Moore's law. That is a difference. Not to mention your average investor does not have any Crypto yet.

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One red flag to me at least in the short term is every epic crypto rise in the past was followed by a severe selloff lasting for months and sometimes years. You can have multi bubbles in same year but at some point there's big profit taking. I can't see why this time will be any different. Longterm like into next year or even later in the year this year I expect another epic rally. I am sure some coins will still do well now but I am talking about overall Crypto market.

I've been seeing a lot of posts like this today... I'll refrain from writing an essay here, but anyone who thinks any investment vehicle is going to go up in a sharp curve without setbacks needs their head examined.

As to where we are, in the BIG picture? I'm more of a long term person... so I have to look at fundamentals. Do I still think cryptos have a bright future? Absolutely! I also see (just to offer a sense of perspective) that the total market cap of ALL cryptos added together still would not rank in the top 100 largest companies by market cap. I say that purely as a reminder that cryptos are no more than a specialized flyspeck in the context of "greater" investments.

Meanwhile, we (meaning this "industry") have been working really hard to gain mainstream interest and acceptance for cryptos. Yet... no more than a few percent of the population have even heard of Bitcoin, let alone invested in any. So assuming we still like cryptos... there is a LOT of cash still waiting to enter the market, even at perceived "high" prices.

Now, let's look at BTC. BTC is not an "index," it's a single "security." What's more, it's a security with finite supply. There's no secondary offering of 10mn BTC just "because the going is good." No dilution of the market supply. That makes it "sticky," too.

As for the index part... the 2000 market crash was hardest on the high tech equivalent of "shitcoins." Highflying stocks that went to the moon for no more reason than they had "dot com" in the name. The bellweathers like Dell, Amgen and others took a beating but bounced back pretty fast. BTC is more a bellweather than a shitcoin...

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Great points. I agree with you. At the end there will be a sifting of the wheat from the chaff. Those found wanting will go to zero... That will be the great reckoning.

Im voting bear.

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That is what I am thinking as well.

I'm pretty sure MANIA's coming!

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I think so as well. My grandma isn't calling me asking me how to buy Bitcoins just yet... when she is, that is the day I will sell it all. :)

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Grandma's are the new canary in the coal mine :)

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Haha yes they are!

Thanks for your informative post!

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You are welcome.

Oh man, I saw an epic rant this morning about people that think that from this point on, there will never be a correction and it will ONLY keep going up... I'll digging out and send it to you :)

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Haha sounds great! I can't imagine how someone could logically argue that something will never have pullbacks...

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Haha yeah I just woke up and couldn't stop laughing.. Later when I'll log in to FB I'll dig it up.

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Sounds good!

Bitcoin and the blockchain are an entirely different monetary system. Although it runs parallel to the Federal Reserve system they are not one in the same. The Nasdaq bubble was fueled by cheap vendor financing/Wall street IPO financing. Bitcoin has very limited institutional investment right now. I don't think we are in a bubble yet...

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I think we are in one... just at the early stages of one. Similar to the spot I circled above. :)

Watching the price of any investment hourly or even daily can drive you crazy, in terms of Bitcoin I view the annual charts as I am a holder and not a trader, obviously different if you are a trader looking to get in and out.

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Great point. I am actually hoping this is a rather large dip so I can get a couple bitcoins at cheaper prices to hold longer term. ;)

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Personally I do not think we will see below $2,000 again, but who knows, dips appear to get bought up fast this year. I look forward to your daily posts, please keep them coming!

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Yea I think we may see a pullback to $1800 at some point here and possibly one down to the $1600-$1500 area... but who knows. Thank you for your kind words by the way! I will do my best :)

I don't think we are headed for a bubble — not until one 500 billion enter the market. Most companies are brand new and unrealized. The hype was from Asia and the ethereum partnership announcement.

It's all good boys and girls. We ain't seen nothing yet.

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Does this mean I still have time to make some popcorn? :)

I just wait for steem ans sbd

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Just wait until they really start to market this thing..

I think that this is normal. It happened a lot before with the currencies and happens always. It will down as it will up.

When you must worry? When it behind to down until nothing.

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Good point. Unfortunately by the time we are able to see that the run is over, the price is many percentage points lower than where we could have taken profits from. That whole hindsight being 20/20 thing ;)

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Sweet!

When the newscasters start quoting BTC regularly and your grandmother calls and asks how to get Bitcoin because all her friends at the Rotary Club are getting it, start watching for the bear trap. It's still mostly fringe right now, so I wouldn't expect to see that bubble for awhile. But, yeah, we'll get some crazy corrections. Anything that goes up that fast will also get strong corrections.

Looks like buying opportunity

What can I add more. Very well explainted. Upvoted and following you. Feel free to do the same if you want. Best regards.

I like it when it goes low because I can buy more and hold. Either way I love it when it goes down or down because I am in for the long haul.

bottom line IMO - blockchain is revolutionary, here to stay, and has the room to grow exponentially for the forseeable future. great post, thanks,

LOVE the graphs!!
I've been looking at the past, as well...and from what I can gather, this is a bear trap...
The reason is, people in general, haven't even begun to know what blockchain, crypto is....even people in accounting, finance, etc....
We haven't even begun to see rapid adoption....
There is a wave of movement coming...
I'm not being optimistic...but realistic...ask anyone of the street what bitcoin, crypto, or blockchain is, and they'll look at you like you have two heads....

We have a long way to go before the zenith, and some corrections are good, so...keep them coming, I say!!!!

Thank you!!
Voted, following, and resteeming!!!

i am very heavy and long on the VXX in the market, and trying to buy some crypto i think they will parallel each other for a while, then cash and go to physical silver

Not enough market capital in the entire cyrto ecosystem to warrant any real attention but any heavy weight bank or hedge fund........ yet

And in order to enter the market you must turn fiat money into some type of crypto first so that will always be the shot in the arm / injection of capital to the market that would need to happen first. and once people see a super steep spike people will take some profit.

It's still early days. more liquidity is required

i love steem and i will buy steem

loll I was in mania phase haha

resteem and upvote for your post....

A bitcoin "derivative" has actually been trading on the U.S. equities exchanges for about 3 years. I only found out about the tracking ETF (I guess you would call it) a short time ago. But it has been running in lockstep with "real" bitcoin. I am giving constant updates on this at my blog. Feel free to follow along. Right now this U.S. exchange traded ETF has a move coming to 160 by my "guesstimation." I believe that would dictate an "actual" bitcoin price of $1500 or so. So I personally wouldn't even consider a buy until that price. I will be constantly updating the sentiment indicators as it is what drives price in ANY market...including Bitcoin.

http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=&symb=gbtc&x=45&y=9&time=18&startdate=1%2F4%2F1999&enddate=2%2F18%2F2017&freq=7&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=0&maval=9&uf=0&lf=1024&lf2=2&lf3=8&type=2&style=320&size=4&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=9

relax man. there are no market manipulators in the crypto space...........yet.