We knew it wasn’t a matter of if, but when.
The fact that BTC jumped $1,900 in six days should scare traders.
“Bitcoin is booming”.
And then some.
It seems like those words are said every day. Though that’s probably because they are…
Bitcoin has been steadily rising all year, hitting record highs daily, and gone up more than 1,200% THIS YEAR. Given how quickly prices have soared and how much Bitcoin costs, the fact that it has gone up more than 66% in the last month is astonishing.
Bitcoin’s manic rise is about to crash, and that’s just about the best thing that can happen for cryptocurrency.
Bitcoin, the first (and most well known) cryptocurrency, was created in 2009 as a result of the 2008 financial crisis. It started catching on over the last few years, seeing significant growth in daily transactions and active users.
In fact, last week, Coinbase, the most popular cryptocurrency wallet, was the most downloaded app in the itunes store. With reports of hundreds of thousands of new Bitcoin investors every single day, Coinbase now has more users than Charles Schwab.
That means large sums of money coming in.
The only problem here is that these are uneducated buyers joining “Bitcoin Mania”. They see the rapid growth and assume it will simply keep going. But what happens when they stop putting money into it? Or when they see the price drop? These new users are following the trend. They’re quick to buy, helping push BTC’s price way up, and will be even quicker to sell once it drops.
“All good things do eventually come to an end…or at least a short term ‘end’. I’m a HUGE fan and advocate of Bitcoin, but with it crossing the $10k mark, I’m watching it very closely for a major pullback. There’s been a lot of hype — and a lot of resistance — around this level. If I were a betting man, I would bet that a LOT of people will be taking profits right around here. The narrative playing out in my mind is all this new money pouring in could quickly punish new traders, possibly driving the weak hands out when we see a drop. The charts and time will tell.”
Jared Anderson, Head of SimplerCrypto
The fervor around Bitcoin reminds so many analysts and investors of the dotcom and housing bubbles of the last two decades. And while Bitcoin will crash, it’s definitely not a bubble.
To be clear, there will be a massive pullback.
How can we be so sure?
This has all happened before. In fact, it’s happened 5 times before.
Not with other assets, but with Bitcoin itself.
In April of 2013, Bitcoin rose to $233 after media coverage first brought it into the public eye, and then crashed to $67 within 24 hours.
Then in November of 2013 Bitcoin skyrocketed to $1,242 as the government recognized and classified cryptocurrency as property before correcting to $600.
A few months later, after Bitcoin climbed back up to the $800 range, hackers stole 850,000 bitcoins from Mt. Gox, the primary crypto exchange at that time. Bitcoin plunged from $840 to $411.
And in 2017, Bitcoin exploded.
It also plunged. Twice.
After BTC flirted with the $3,000 milestone in June, there was a major pullback to $1,975. Then it shot right back up to $4,500 before dropping nearly $1,000 on news that China was cracking down on Bitcoin.
The rest, as they say, is history.
All of these sudden surges saw a correction with major pullbacks averaging 46%. And each time, the world was ending.
Bitcoin is at 10k. We can expect another correction in the near future as Bitcoin settles back to its mean.
We’re currently in a “mania phase”. We can expect a dip, followed by a “return”, followed by a major pullback and correction.
This “bubble” pattern happened with dotcoms and real estate.
(Image Courtesy of Blockchain Investor)
But Bitcoin’s market cap, even now, sits at about $160 billion.
When the housing market collapsed, that market cap was over $7 trillion, and built on money people did not have.
There are no margins in Bitcoin.
People buy with funds already in their possession.
And while there can absolutely be losses for traders in Bitcoin, to compare this to disastrous financial events of the past doesn’t make sense.
The coming pullback is a good thing.
It presents a major buying opportunity for traders. History shows that Bitcoin has a record of plunging and then recovering and trending up. That’s going to happen again.
After the correction, Bitcoin will get back on track with a controlled, profitable rise upwards.