The crash in bitcoin is starting to look like something more than the minor setback like we’ve seen in the past few weeks. It has fallen  more than $6,000 from its peak at $19,661 which is highlighted in the chart below. I think this is a great thing for stock investors because it could mean the bubble could be over. If it’s over now, I don’t think the crash will cause many problems for the economy or stocks as the total cryptocurrency market cap peaked somewhere around $600 billion. This could be a premature obituary, but it’s important to recognize that there won’t be a plateau. When it starts to fall, it will crash like a rock. The price hasn’t been stable on the way up and it won’t be stable on the way down.

The bitcoin rally of 2017 will be written about in the financial history books because the size was unlike anything we’ve seen since the late 1990’s tech bubble. There are people who don’t know much about finance putting a few hundred dollars in bitcoin because they heard about it going up. Socially, it’s unusual to see such actions take place because people aren’t realizing that the fact that they are putting money in it is a sign of a top. The stock market hasn’t had a 3% selloff this year and is up 20%, but this crypto craze makes stocks look like they are standing still.

Yield Curve Flattening

The top story of 2017 in the traditional markets was the lack of volatility. Next year’s top story will be the yield curve. The yield curve inverting is known as one of the best indicators for a recession. The moment it inverts, everyone in finance and in the financial press will be talking about it. Just it falling below its previous cycle low was enough to get everyone buzzing. There is pent up demand for a negative story as weird as that sounds. Since this will become the 2nd longest expansion since 1854 in 4 months, investors are waiting for the first shoe to drop. Even if the yield curve inverts in 2018, there’s a strong chance this becomes the longest expansion as there’s a delay between a yield curve inversion and a recession.