This week it hit $19,000. What’s next?
by Adam Taggart, Peak Prosperity:
Wow. Just….wow. Bitcoin’s price has gone ‘beyond exponential’ this week. Just yesterday, as I started working on this article, it shot up 22% — from $14,000 to $17,000 (hitting an intraday high of over $19,000).
And that’s after a mind-blowing upwards rocket ride over the past several months.
I think it’s safe to say that the vicious melt-up in price over such a short timeframe has surpassed the expectations of even the starriest-eyed Bitcoin fanboys.
The whole world, especially the 99.99% of us that own zero cryptocurrency, is asking: What happens next? And, What should I do?
Is this insane trajectory going to continue for a lot longer? Do I need to get in now to avoid missing this once-in-lifetime fortune-making opportunity?
Or is this a classic bubble blow-off top? Is this the deadliest time to enter, right before the price implodes?
An Expert’s Take
I had the chance to ask these questions Wednesday to a long-time veteran in the digital currency space. We met at a gathering of online media ‘mavens’; this guy has published news and analysis on cryptocurrencies since 2011, for both investors and developers. He knows the space exceedingly well.
Unsurprisingly, he holds a lot of Bitcoin. I didn’t ask directly how much; but knowing that he was covering the space back when Bitcoin traded in the single-dollars range, my conservative mental math quickly concluded he’s probably worth more than most people I’ve met in my life.
So here what I learned during my chat with him:
- He thinks the current price action is “nuts”: To his veteran eye, the current frenzy is a speculative mania and will end in a massive sell-off, resulting in huge losses for those buying in at these prices. He’s watched Bitcoin long enough to have seen it experience several 70%+ corrections. In his mind, this will simply be the latest one. And there will be more in the future, he predicts.
- But he’s not worried in the long run: Like many longtime crypto investors, he sees a much higher price potential for Bitcoin. But to reach that level and sustain it will take years. The currency will need to be much more widely held among the general populace and used in a material percentage of transactions (i.e., not just being held by speculative investors). Until then, he expects lots of volatility (both up and down) of the sort we’re seeing now.
- He admits that Bitcoin could lose out to a superior successor: When asked if the capital currently flowing into Bitcoin could flee for a better crypto ‘mousetrap’ in the future, he says “sure”. Which is why he has diversified holdings across a number of cryptocurrencies and watches new entrants into the the space closely. But one advantage Bitcoin increasingly has over the rest of the crypto field is scale. He gave a highly-technical argument for how the blockchain actually has limited value without a platform to offer it sufficiently critical scale. “Does Bitcoin offer that critical scale yet?” I asked. “Probably not yet” he answered, “But it’s much closer to it than any other competitor at this time. And it’s growing faster than the rest.” Translation: Bitcoin is the odds-on winner at this point.
- He expects the world’s central banks to criminalize the cryptocurrencies: We talked about the central banking cartel’s longstanding monopoly of the money supply and its historic ruthlessness for squashing all competition. He agreed that the central banks would like nothing more than to replace the current cryptos as well as all paper fiat currencies with digital sovereign versions. And he predicts they will likely try to do exactly this. How successful will they be? Uncertain. He can certainly foresee a time when they ban ownership of Bitcoin and its brethren, criminalize transacting with them, and shut down the exchanges. Though while the cartel may be able to seriously curtail Bitcoin et al, he doesn’t see it succeeding in driving them to extinction for several reasons. One he offered that I hadn’t heard before (but have since verified) is that private investors have put a network of satellites up in space dedicated to making it possible to transact in Bitcoin anywhere on Earth even if the terrestrial networks are taken down by the authorities or natural disaster.
His overall takeaway? Don’t buy at today’s prices; wait for a correction (it could be a really big one). But once it happens, buy in and hold, as he sees the price going much, much higher over the next decade.
By the way, I’d share this guy’s name with you but he asked me not to. Given how stratospheric Bitcoin has risen over the past year, he says his biggest priority right now is to fly under the radar and have as few people as possible be aware of his crypto holdings. Apparently this has recently become a real concern for Bitcoin investors who have suddenly become overnight multi-millionaires (Or hundred-millionaires. Or in the case of the Winklevoss twins, even billionaires). A vast windfall like this makes you an alluring target to criminals.
Just one more unexpected consequence of this crypto mania we’re watching play out in real time.
The Peak Prosperity View
The above expert’s views match well with those of our team’s outlook here at PeakProsperity.com.
Charles Hugh Smith, who has been writing about Bitcoin for us since it traded below $600 has long had a price target of $17,000 — which seemed unattainably high even just one short week ago. That underscores how insane the price moves of the past few days have been.
With the $17,000 milestone hit so quickly, does he think a large correction could ensue? Very possibly. (I should make clear though, he remains quite bullish about Bitcoin’s long-term future potential).
Davefairtex, our resident charting expert, notes that his model now shows Bitcoin’s level of overvaluation at “nosebleed” levels with a daily RSI of over 98 and the forecaster clearly predicting a reversal:
And reader mrees999, our community’s most-respected educator on the cryptocurrency space — and one of the biggest advocates earlier in the year for buying Bitcoin — offered the following words of caution yesterday:
I probably wouldn’t get in now. It’s gotten irrational with FOMO. I’m selling into this rally and waiting for a massive correction once the bit shorts come in with the futures trading about to begin.
(Again, I should point out that mrees999 remains robustly optimistic about Bitcoin’s longer-term future price potential.)
To the above, I’ll simply add two additional pieces of data to show how quickly Bitcoin has outstripped any sort of rational justification for its recent price explosion.
The first is this chart below, which shows how Bitcoin’s price has blown above the maximum Fibonacci extension between its previous swing low and yesterday’s swing high (note: this chart was created before the price continued higher to $19,000):