The Dirty Little Insider Secret Why Bitcoin Will Rise and Soar Again
Bitcoin price will soar over time
Price of bitcoin will soar again
The rapid rise in price of bitcoin, and its equally rapid descent, has caused some confusion and consternation in the sector, as most investors in the cryptocurrency believed we were still in the early innings of the game.
With bitcoin plunging in value, it caused many to rethink their thesis and believe bitcoin had went through the stages far faster than the market thought it would.
If you're one of those that believe that, get that thought out of your mind. Nothing has changed in regard to the stages bitcoin is going through, and I'll show you why it's still in the early part of the second stage.
We must understand who was buying bitcoin
I've written in the past concerning the way all new asset classes evolve, but I'll give a brief update for the purpose of this article.
What happens in the early stage of the emergence of a new asset class, early adopters, or those willing to take on a lot of risk, are those that are invested in the specific financial asset. They work together with those that are the inventors or tinkerers, and they back them up with capital to develop the asset and make it ready for prime time use. That stage is over with now.
Next to come on board is smart money, or institutional investors, usually in the form of hedge funds. Some individual wealthy people or angel investors also can take an interest.
Finally, once a lot of money is in play, the general public gets wind of the opportunities and start to bid up the value to what will become bubble proportions. The bubble eventually bursts, as it did with the Internet and mortgages since the turn of the century, and the specific sector resets and usually continues to grow after the speculators and weak companies or assets fail.
I maintain that we're still in the early, or possibly mid-stage area of growth of bitcoin, and we have yet to truly experience the inevitable steep climb in its value.
This is important to understand because many analysts and financial pundits have already written off bitcoin at a time when it's probably the most healthy it's ever been.
So what happened with the big plunge in bitcoin's value?
My thesis and contention is what happened with bitcoin was a feint; a plunge in value that had the appearance of a bubble bursting, but was in fact a temporary correction coming from the entry of speculators into bitcoin.
Why is that different than what is coming ahead? The difference is the people entering into bitcoin were still primarily a younger demographic that was primarily motivated by the fear of missing out (FOMO). They drove up the value of bitcoin, but it was never sustainable, even in the short term.
That's because the smart money or hedge funds were just starting to put a significant amount of capital in bitcoin and some other cryptocurrencies, which if you understood what that meant, you would have waited it out and got back in once the price of bitcoin found a floor and started moving back up. That is happening as I write.
What all this means is money was starting starting to flow into bitcoin, so the rapid increase in value gave the appearance of it quickly transitioning into the third stage, when in fact it was those that missed out on the first stage of bitcoin's development that were getting in. This is what gave it the appearance of being the bubble bursting, when it was simply the last vestiges of the early adopters that had been slow to take a position in it. That, or their peers that had watched them make so much money.
Other than that, the remaining demographic age groups have yet to take a position. They still haven't. That's going to change in the future.
Bitcoin is in the second stage
For now, bitcoin will remain in the second stage of its growth, which after the correction, means it'll remain tighter than it had been before the correction.
The reason for that is most of the inexperienced speculators have sold off their bitcoin holdings, meaning the market has tightened up and most of those still holding their bitcoin have no intention of selling at these low prices. They believe, as I still do, that the price is going to rise in the 6-figures, and possibly as high as $1 million in value.
I don't know about the $1 million, but hitting $100,000 and more is easily in reach in my view, for the reasons stated earlier.
What will happen is as more money is spent on infrastructure, and companies embrace the underlying value of the blockchain in general, bitcoin will be considered a valuable asset, as well other cryptocurrencies like ethereum. They will also be trusted and understood better by the general population.
Consequently, when that occurs, the price of bitcoin will once again start moving fast because the older demographic will start investing in it, and they have a lot more money than the younger people that had invested in bitcoin speculatively.
As this happens, emotion will start to take over and people will start bidding up the price of bitcoin to enormous levels. As that happens, that's when the real bubble will be expanding, and when it'll finally burst. This will take some time to happen. That will be the third stage.
Interestingly, when the smoke clears in the aftermath, that's when bitcoin and surviving cryptocurrencies will find their long-term intrinsic value.
What to look at and wait for now is where the hedge funds are spending their money in the blockchain or cryptocurrency sector. Bitcoin is the bellwether for the industry, so how the rest of the blockchain sector goes, so will go bitcoin.
We want to see many of the potential uses of the blockchain start to be reported on, explained, and gradually understood. As that happen, the price will steadily move up, but differently than it did when it was so volatile.
It'll remain volatile to a degree for some time, but that volatility will be less than it was before because of the majority of speculators no longer being in the market.
This will give a sense of continuity and safety than it had before, and with the growing acceptance of bitcoin, cryptocurrencies and blockchain technology and uses, the public will gradually get more comfortable with it.
As the price continue to climb, it'll start to attract many more retail investors, which will start to drive up the price of bitcoin as they talk about their investing success with friends and family. That in turn will increase the pace of the rise in price because those people will be the new speculators, who will act similar to the first group, which were investing because of the fear of missing out, rather than understanding the fundamentals behind why bitcoin was being driven up in value. This will be the true bubble.
The bottom line is we're not even close to bitcoin reaching the bubble people have thought it would reach, and those that remain patient will take part in another huge upward move in price before the bubble really bursts.
Even after that period of time bitcoin and the sector won't be destroyed, they'll only start to be looked upon as the newest asset class that will deliver value and improvement to the lives of people, businesses and governments. By that time it'll start to act like all other sustainable asset classes.
The main difference between bitcoin now than in the past is the days of rapid increases from a low price point are over. There is tremendous opportunities in other cryptocurrencies, but that's a different topic. Bitcoin should be the foundation of any portfolio of cryptocurrencies, and should represent a higher percentage than any other token for now.
Bitcoin is going to continue to move in a tighter range, and as investment increases and people and institutions get more comfortable with it, as well as understand it better, it's going to begin another upward run that will take it into at last the $100,000 per coin range. We need to be patient and wait for that to unfold.
Those that do will multiply their investment seed capital many times over. Just don't put any money into it you can't afford to lose, because you may not have the discipline or nerve to hold on for the long term. If you sell because of internal pressure from a fall in price, you could lose a lot of money. That's why only investing what you don't mind losing is the best strategy to use.