Imagine I told you I created a technology that could revolutionize finance and governance.
As the #1 competitor in a $100 trillion market, it has a massive first-mover advantage. Thousands of developers use its technology and several billionaires have launched new ventures to bring it more value, utility, and positive attention.
China and the Marshall islands are using spin-offs of this technology to implement their monetary policy.
Adoption has grown steadily for years, sometimes exponentially, yet still reaches less than 5% of the human population. Facebook, Microsoft, Ernst & Young, IBM, Walmart, JP Morgan, and many other businesses have used this technology to develop new products and services for their clients.
You can buy a small stake in this technology in return for a token you can exchange with anybody, anywhere, anytime, instantly. Oh, and I forgot, the price of this token has gone up for five of the last six years (including this one). Since inception, its value has grown over one million percent. Over the past 12 months, its price has doubled.
What’s your response?
No thank you. Too risky. It’s going to zero.
This is bitcoin today.
When you look back and see last year’s drop from $14,000 to $6,500, it makes more sense why people seem skeptical.
We’re down a lot from $14,000. For over half a year, the price has struggled to get anywhere near it, going as high as $10,000 before crashing.
Far short of the mark.
As of this post, bitcoin dropped below $8,500. Now, many analysts predict the price will go lower, some suggesting $7,900 while others speculating as low as $6,500 or worse.
If we go to $7,900—or even $6,500—bitcoin’s price chart will look like this:
Does that look like a distressed asset stuck in a bear market?
What if we zoom in to the most recent 15 months, the time since our last bear market ended?
Let’s assume we do go down to $7,900. Here’s what the chart will look like:
Even if bitcoin’s price goes down to $7,900, the trend is clear. Price keeps going up.
Not straight up, of course. But how can anybody look at that chart and see anything other than a bull market?
But it doesn’t feel like a bull market . . .
Bull markets always start like this. Do you remember when the U.S. stock market went up 40% in one year? No?
That makes sense. It happened in 2009, at the end of the Great Recession.
At the time, few people realized that would kick off an 11-year bull market. Expert analysts predicted further crashes.
Sometimes it takes a while for good news to sink in—especially with everything that’s going on with traditional markets right now. It seems like everything’s crashing.
Contrary to the news reports, bitcoin’s price is not correlated to the stock market or any other asset class. We have lots of data proving this. While prices may move in tandem for a week or two, that short-term tendency falls apart over time.
Not calling for a moonshot (yet)
To be sure, I’m not suggesting we will get an 11-year bitcoin bull run. Simply pointing out that bitcoin’s price remains on an upward trajectory.
As I explain to subscribers of my Crypto is Easy newsletter, we could see a crash to $5,400 and remain in a bull market.
But when you see a drop from $14,000 to $6,500, and now another drop from $10,500, it’s no wonder people are still scared.
That massive 2018 crash is still fresh in people’s minds. These smaller, more recent ones only serve to reinforce the fear of another one.
Could we go into another bitcoin bear market now?
Of course. But let’s not call for a bear market until we have some evidence.
Volatility does not mean doom
If you want that $1 million bitcoin everybody dreams about, you have to accept massive crashes along the way.
Some crashes are setbacks, others cause actual bear markets. We have had a setback, but that does not mean the bull market has ended.
Expect higher prices. And crashes. And, eventually, a bear market.
Just not yet.
Mark Helfman is editor of Crypto is Easy and a top writer on Medium for bitcoin and investing topics. His book, Consensusland, explores the social, cultural, and business challenges of a fictional country that runs on cryptocurrency. In a past life, he worked for U.S. House Speaker Nancy Pelosi.