Look, I’ve got some shitty news for you about Bitcoin: if history is any guide, what you saw on Friday morning (when everyone’s favorite “currency” that isn’t actually a currency in any sense of that word crashed below $11,000) is nothing compared to what’s coming.
Here’s a chart that shows you the history of Bitcoin crashes:
It is not unusual for Bitcoin to collapse 70% or more after ascending to new record highs.
Who knows, maybe that’s what Mike Novogratz was referring to when, amid Friday’s chaos, the Bitcoin uber bull suggested that in an “extreme” scenario, it could fall to $8,000.
For the time being, it appears the slide has been arrested. On Saturday, Bitcoin has “stabilized” between $14,000 and $15,000.
And make no mistake, this week’s harrowing decline hasn’t deterred all of the bulls. On Friday, Fundstrat Global Advisors’ Thomas Lee recommended investors buy the dip, calling the drawdown a “correction within a long-term bull market.” He also said wallets, or unique IP addresses, will likely rise 50% by mid-2018.
Meanwhile, Goldman is of course moving quickly forward on setting up a cryptocurrency trading desk, a sign that Bitcoin and other digital currencies are on the fast track to mainstream adoption on Wall Street.
Still, skeptics abound among the big banks. “The poor design means that bitcoin is likely a bubble [and] other crypto-currencies are likely to take over,” Citi wrote in a note out this week, adding that “another tripling of bitcoin prices to $60,000 could trigger government action in the more heavily invested countries.”
It’s worth noting that in an environment characterized by low vol. in traditional assets, Goldman’s rivals likely won’t be able to afford to stay on the sidelines if Blankfein and co. do indeed move aggressively into the space.
In an effort to provide a bit of holiday levity that the bulls likely will not appreciate (Bitcoin proponents aren’t much for self-deprecation), we’ll leave you with a fun video from JP Sears:
“He also said wallets, or unique IP addresses, will likely rise 50% by mid-2018.” He just doesn’t understand the basic economics limiting cryptocurrency adoption – and or that the current mania is actually limiting its adoption. Cryptocurrency using current blockchain technology will always be far more expensive (non-competitive) than current commercial transaction methodologies. Just as 3D printing has not been disruptive as so hugely forecast a few years ago – because of a lack of basic economics for mass production – cryptocurrency has similar economic issues. In the economically self-limiting vein, it is also important to understand that apparently half or more of current BitCoin transactions are being accomplished off-chain (no blockchain security benefits – so why adopt a more expensive and less secure platform?). This is mostly caused by the rabid speculation driving current BitCoin prices but not its actual usage as a “currency.” This rampant speculative buying and selling (essentially illegal public buying and selling of an unregistered security) are actually limiting commercial transaction scale adoption of BitCoin and others. Again, only a fraction of a percent of cryptocurrency transactions are for commercial products. Consequently, there is no reason or leverage to create massive commercial adoption and it is only the raw speculation that his driven cryptocurrency pricing so far.
Until you start seeing cryptocurrencies representing a significant percentage of commercial transactions (cash, credit cards, PayPal and others – there is no reason to believe that wide spread commercial adoption is actually occurring and or that cryptocurrency have a future as a commercial exchange medium – let alone a digital currency – until you do see this.
DMD,
I agree with what you are saying but I also think that some of the other, (shall we say, above board) coins, have the potential to displace and surpass BTC and eventually fulfill the original concept that BTC was designed for. (You know, other than as a method for the drug cartels to launder monies). BTC has not yet, and may not ever at the rate it is going, accomplish this.
Unless the miners of BTC change their way of thinking they are going to be left behind.