The Bitcoin Peak Might Be In

There’s a belief system among long term investors in bitcoin, known as hodlers, that bitcoin will always rally. The concept is if this rally ends in an elongated correction of 50% or more, there will eventually be another rally which brings it to new heights a few years down the line. I don’t agree with that thesis at all. Given the lack of advancements in the blockchain technology recently with Coinbase constantly shutting down when there’s volatility in bitcoin, transactions taking a long time to confirm, and transactions costing more money, I don’t think this currency can increase in value exponentially. There’s a high threshold for thinking something will increase in value exponentially which bitcoin doesn’t meet. Therefore, I think we’re near ‘peak hype.’

The longer the price stays below its $19,600 peak and the further it falls, the more likely the peak has occurred. As you can see, there were 84 crypto dedicated funds started in 2017. The biggest skeptics on Wall Street are now giving in to FOMO and buying into the crypto space. The latest investors in bitcoin are the weakest hands. They don’t know much about it and are only buying because it is going up. Once it starts going down, those weak hands will sell and the house of cards will collapse.

As I mentioned, it’s possible the peak is in. It’s currently in a rough period right now as the price has fallen 1.9% on Wednesday to $15,445. There have been many failed calls for the death of bitcoin in the past few years. To be clear, I’m calling for the death of this rampant speculation, not the entire currency. The currency will likely live on with some valuation as the investment into blockchain technology continues. The hype cycle in blockchain got bigger than other new technology advancements like 3D printing because there’s such a limited supply of the coins and the financial conditions are loose. 3D Systems stock still exists now. It has a $1 billion valuation, but it’s down about 91% from the peak in 2014. That’s a model for the expected price action in bitcoin in the next few years.