Let's Talk About The Fad Term Of Our Time... "Bitcoin Bubble". Is "Bubble" Now Such An Overused Term That It No Longer Applies?
We've all heard it by now and the price explosion in Bitcoin over the past 24 hours has again brought talk of a "Bitcoin bubble" into sharp focus. Some intelligent people are writing about this thankfully and one particularly articulate article was published yesterday here which I'll be quoting from in this post.
@marketreport (aka Gregory Mannarino) has often stated that there are a certain requirements that need to all be in effect for any market to be legitimately "bubbled". For the sake of being succinct, I'll jump to the pertinent one straight away and that's main-stream adoption. As utilitarian as Bitcoin is and as exciting as the price action is, we're nowhere near main-stream adoption.
Case in point is a guest we're hosting at our home at the moment. She's a friend we know from interstate and one recent evening we were all chatting and I raised the topic of Bitcoin. I got the (probably familiar to many) response of "what's Bitcoin". Now for context, this is an individual much after my own heart in that
- She hates banks and believes they enslave us.
- Knows the name Rothschild and understands their nefarious activities to some extent.
- Already had heard of Steemit prior to me mentioning it!
It's consequentially fair to say that she's one of the awake ones, yet still hadn't heard of Bitcoin. I attempted to explain it (poorly in my typically self critical style) and the concept, I thought, sunk in quickly. After explaining about what you can do with it and how you acquire it (either through mining or exchanges) I thought she got the first penny drop moment comparatively quickly. As an aside, it was fortunate that this conversation happened the evening here in Australia that Bitcoin ripped.
I was able to illustrate the next morning the price rise, something always good for conveying interest in something! Anyway back on point... if someone with this base level of knowledge of the "hidden secrets of money" as Mike Maloney would say hasn't heard of Bitcoin then we're a long way off heavy adoption. The conclusion from Greg Mannarino's perspective then is that there aint no Bitcoin bubble.
What's more, we've been seeing the start of big money move into the space in general. Here I'll quote from the above reference article to do some of the heavy lifting for me...
More than most markets, bitcoin tends to act somewhat predictably for analysts and they were waiting for yesterday afternoon’s cues. One of our favourite analysts made the call at this time that it was about to rally and he could see no real resistance before US$6000 and could easily go beyond.
Just a couple of days ago billionaire Wall Street legend, former Fortress Investment Group Principal and an ex-partner at Goldman Sach Michael Novogratz boldly predicted bitcoin will reach $10,000 in 6 to 10 months in an interview on CNBC. So confident is he in the crypto market he has come out of retirement and putting $150m of his own money into a new crypto fund.
Constantly challenged by the interviewer about whether bitcoin is a bubble, he clarified that yes it could be called a bubble, and indeed said "cryptocurrencies were likely the biggest bubble of his lifetime," but he explained as follows:
“Remember, bubbles happen around things that fundamentally change the way we live…..The railroad bubble. Railroads really fundamentally changed the way we lived. The internet bubble changed the way we live. When I look forward five, 10 years, the possibilities really get your animal spirits going.”
When asked if this were like the dot.com bubble where there were huge losses on it ‘popping’ he sagely reminded us that at the height of the dot.com bubble, it had a market cap of around $6.5 trillion. Comparing that to the current total market cap of all crypto / blockchain assets of just $200b he reinforced that we are still very much in the infancy of this ‘bubble’ if that is the term you want to use. He reminds us that no one would have predicted the extent of the internet on our lives in 2017 back in 1997 and said that is where we effectively are now in the likely coming disruption of the blockchain. He states that bitcoin is the ‘bellwether’ of the entire decentralised revolution.
It would appear that even JPMorgan are having second thoughts, just one month after CEO Jamie Dimon labelling it a fraud they said overnight they are indeed "very open minded to the potential use cases....for digital currencies that are properly regulated"….
What a great lead-in to the court jester that is Jamie Dimon. I have to borrow an image from Zerohedge here as I think it hits the nail on the head.
After the hilarity of his last attempt to talk down Bitcoin in a now obvious attempt to buy the dip that he created, he's at it again in reference to the recent price spike.
"I wouldn’t put this high in the category of important things in the world, but I’m not going to talk about bitcoin anymore."
Oh stop already Jamie, my ribs hurt from laughter! From Zerohedge:
It seems 'anymore' to Dimon means 'less than 24 hours' as during a panel at an IIF event today, the outspoken bank boss - apparently still feeling threatened by the disruptive technology - lashed out again at the cryptocurrency...
*DIMON: PEOPLE WHO PURCHASE BITCOIN ARE STUPID *DIMON: "WHO CARES ABOUT BITCOIN?" *DIMON: I DON'T UNDERSTAND THE VALUE OF SOMETHING WITHOUT VALUE *DIMON: I COULD CARE LESS ABOUT BITCOIN *DIMON: BITCOIN IS `A GREAT PRODUCT' IF YOU ARE A CRIMINAL'
And then he ended with another promise...
*DIMON: THIS IS THE LAST TIME I TALK ABOUT BITCOIN
We wonder how long that will last.
Now the one thing I'll note here is that large investment banks are not in the business of positioning themselves on the wrong side of a bubble. In fact to the contrary; typically they're instrumental in the creation of bubbles that they profit from on the long and short side of. Translation? Thank you Jamie Dimon for the huge buy signal! The conclusion here then would also be that there aint no bubble.
Back to the original article reference which quotes from eToro’s UK MD, Iqbal Gandham.
“Recent criticism from industry and regulation crackdowns in China and Russia spooked markets in recent weeks and caused the Bitcoin price to plummet. So we expect some investors to be surprised by Bitcoin bouncing back to this record high so soon afterwards.
“Yet Bitcoin was designed to operate outside of the influence of governments and central banks, and is doing exactly that. So to us, this bounce back in price is no surprise.
“In reality, whilst we’re excited to see Bitcoin hit this record high, this is just the beginning for Bitcoin. Bitcoin has a lot further to go than this price point to become a real world currency, as it was designed to one day be. Most are unaware that in future people will not spend a single Bitcoin. Instead people would spend the underlying tokens, called Satoshis, in the same way we spend coins and not a bar of gold. A single Satoshi is only worth $0.00005 currently. Clearly, for this to gain spending power, the price of a Bitcoin will need to be significantly higher than $5,000.
“This price peak may boost more support for the bubble argument we’ve seen from investors in recent months. But we continue to argue these calls on bubble territory are coming far too early in the story for Bitcoin.
“This record is an exciting milestone and sign of market confidence in the outlook for Bitcoin and the underlying technology behind the cryptocurrency, Blockchain. But we expect many more milestones like this to come.”
So there you have it in folks. Although it's not an exact science of course, there's much to be argued for the case that there's still steam in this engine (so to say). As always, diversify over low correlation assets, keep stacking your gold and silver (#steemsilvergold is a great resource here), minimise your debt and keep some space in your thoughts for the evolution in finance that is Bitcoin and the blockchain more broadly.
What do you think? Are we in a bubble? If so, when it pops, where will the capital go in an already "everything bubble" scenario? Let's discuss as I think it will be an important issue to reconcile at this price level for people who need to make a call on whether to buy, hold or liquidate.
Thanks as always for your attention!