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Having seen four of these major wipeouts over the years, here's the pattern for this highly cyclical spectacle: 1. Nobody cares about Bitcoin. If you tell anyo
by apo 8y ago
Having seen four of these major wipeouts over the years, here's the pattern for this highly cyclical spectacle:
1. Nobody cares about Bitcoin. If you tell anyone you bought it, they either shrug or laugh.
2. Bitcoin refuses to die. The long-predicted technology show-stoppers never happen and the network keeps chugging. A small but dedicated group of users continues using it on a regular basis.
3. Speculators who had written Bitcoin off as a fad take a second look.
4. Defying any explanation, the USD/BTC exchange rate begins a modest rally.
5. The financial press starts running stories about that crazy Bitcoin idea, and how it's not dead and the modest gains made by those crazy enough to buy in.
6. Seeing this coverage, people without much technical or financial savvy begin getting interested in Bitcoin.
7. Stage 6 continues relentlessly, producing jaw-dropping gains.
8. The financial press gives Bitcoin a bear-hug, dedicating special attention to it with special segments and even dedicated shows.
9. A full-blown speculative mania is now in progress. Gains of 3-8% per day, for days on end are not uncommon. Everyone, it seems, is an expert on Bitcoin.
10. An event takes place. Most likely, the collapse of a major Bitcoin exchange, although it could be something else. Regardless, a sharp decline takes place.
11. A prolonged period of USD/BTC declines unfolds. Initially, the press is all over the story, telling the tales of woe from those who bought in at the peak of the mania and lost it all.
12. Occasionally, BTC/USD shows signs of life, either rallying sharply or falling precipitously. These short-term changes are usually reversed quickly.
13. After months or years of flat to downward USD/BTC motion, the only people left holding bitcoin are those who understood it and wouldn't sell at any price.
14. GOTO 1
- projektfu 8y ago"13. After months or years of flat to downward USD/BTC motion, the only people left holding bitcoin are those who understood it and wouldn't sell at any price." Lol
- Nursie 8y agoThe brake on the cycle that I see coming is that eventually, surely, everyone that can take part in steps 3 and 6 has already taken part in one of the cycles and quite a lot of them got burned. Or more succinctly - surely sooner or later you have to run out of naive speculators?
- dmd 8y ago250 people are born every minute. Some of them are bound to be suckers.
- timerol 8y agoOne potential counterargument to this is scale. Before 2012, I hadn't heard of Bitcoin. Back in '13, it was me and a couple of my nerd friends who were talking about this crazy Bitcoin surge. I read some about the algorithm, thought it was cool, and left my money elsewhere. It was mostly low-traffic articles or niche sites that talked about it. A year ago, my dad asked me about it. My coworkers claimed to be experts on it, but only had the most basic understanding of Merkle trees, and no real context on mining difficulty adjustment. Each successive bubble has involved more and more people who are new to Bitcoin. At some point everyone who cares about the "get rich quick" aspect will have already heard and gotten burned.
- jayd16 8y agoYou'll notice that absent from this cycle is any kind of productive use or innovation with bitcoin. Its all cyclic hype.
- evgeniysharapov 8y agoBitcoin is a solution, that is still looking for a problem.
- gymshoes 8y ago42
- thedeepself 8y agomoney outside govts and banks, money that crosses borders, publicly verifiable tamper-proof transactions, and more. BTC has plenty of value.
- ejanus 8y agoSimple....and well crafted ..but this is not limited to BTC and company. The same pattern happens in other markets , equity, bond and debts , fx , and the rest. But BTC was unique because one does not need to pass lengthy huddles before buying it unlike say buying Google stock if you live say in Libya .
- gist 8y agoThis is really strange but it's like I'd rather be right than be rich. For example I am in no way a believer in bitcoin as having a future of anything. I did not buy any for that reason (among other reasons for example I am not a gambler and think rationally). However I have made a great deal of money over the past few years (like a really large amount 7 figures) catering to people and companies that believe in bitcoin and crypto. But all along I am waiting for it to end. Because it's like I'd rather be right and smart with instincts than be wrong and have the money. Ok maybe I don't mean that literally. The money is nice. But it comes close to how I feel. As if I will have the satisfaction eventually even if the money ends for me (because bitcoin and crypto goes away) since my instincts will have been right. I am wondering how many other people feel this way. I don't mean people who haven't profited (but would still like to hear what you think) but those who have profited off the ecosystem around bitcoin. And I wonder if it's similar to what the people selling pick axes felt. I never felt this way back in the 90's about the Internet. Was very clear that appeared both valuable and would end up being a big thing.
- Ologn 8y agoThe problem with this hypothesis is that step 9 kept having a higher and higher Bitcoin market cap, until it hit a ~$300 billion in January (and cryptocoins in general hit $800 billion market cap). It is like subprime mortgages or dot-bomb stocks or tulip bulbs or what have you, at some point it becomes significantly large enough for people like Charlie Munger to have to contemplate it and deem Bitcoin "rat poison". Then its $300 billion market cap falls to $80 billion, which is its current market cap. IMHO, Bitcoin's market cap will be near $0 eventually, as it is worthless. So there is still air to deflate that balloon. Unless investors want to pour $220 billion back into Bitcoin to reinflate it.
- jki275 8y agoThat's not really how market cap works. Market cap as calculated doesn't equal the amount of money put into the system.
- sdinsn 8y agoThe past is not always the future.
- FabHK 8y agoFWIW, the universal convention in FX markets is to quote in terms of UNDerlying currency/ACCounting currency (sometimes also called BASE ccy/QUOTE ccy), ie the price of one unit of the underlying ccy in terms of accounting ccy. Thus, the generally quoted price is BTC/USD (around 5000 as of this time), namely the price of a Bitcoin in USD. USD/BTC, on the other hand, is the price of one USD in BTC, or about 0.0002. (Of course it might well be the other way around in a year or so.) Note that CC1/CC2 * CC2/CC3 = CC1/CC3, and thus CC1/CC2 / CC3/CC2 = CC1/CC3, which is where that odd convention originates from (because setting eg CC2=USD, you divide the dollar price of CC1 by the dollar price of CC3 to get CC1/CC3). EDIT: clarify