I know I have been posting about digital currencies a lot lately, so my apologies for not keeping things varying in terms of topics this week. I’ll be back to writing about other stuff and posting photos before long, I promise!
A New Chapter
We are witnessing a pivotal moment in cryptocurrency history right now. The endless pump-and-dump altcoin launches, ICO scams, POD scams, and pointless litecoin clones that dominated much of 2014 are officially done for, by my measurements. Enough of the world’s technology visionaries have studied blockchain tech and already placed themselves or their companies in strategically advantageous positions for the next phase of the movement. And that’s just what we know about from public news outlets and backing or support from VCs, corporations, and governments. There are some very large hands in the pot already – highly influential organizations and people executing long-term strategies to give them a significant advantage in a not-too-distant world in which this extremely disruptive technology changes the way business is conducted on macro and micro scales.
Let Loose the Bulls
In the past 24 hours bitcoin dropped from roughly $250 to a low of $166 (more or less, depending on which exchange you examine). It has been one of the most significant movements in the USD value of bitcoin in quite some time – a 34% drop in value in 24 hours! While I am by no means even remotely an expert in economics, currency or commodity trading, and especially not BTC/USD trading (my recent trading performance has been downright depressing), it is my opinion this dramatic event marks the beginning of the end of the downtrend. A downtrend that began just over a year ago when BTC hit an all-time high of $1216.73, then almost immediately began a painful descent to where it is now. This sounds terrible, and indeed bitcoin was among the worst performing investments of 2014. But keep in mind, for the sake of perspective, that on Jan 1, 2013 bitcoin was trading at just over $13, making it one of the absolute best performing assets over the past two years.
To me, however, a clear signal that bitcoin is absolutely oversold is the sentiment among individual traders, particularly the very loud group of teens and twenty-somethings on Twitter who ramble on day in and day out about the supposed uselessness of bitcoin, making short-sighted statements about the end of bitcoin after today’s crash as they make mountains of the currency playing the volatility of a day like today with margin trading.
— CryptoRobot (@djspang)
Dead dead dead dead dead dead dead dead dead dead. bitcoin is dead
— eric evans (@eric_d_evans)
Someone even said to me tonight “There is no way btc goes up again… no way it goes up ever. It’s just the end of four bubble cycles of a worthless asset.” Followed by “No one cares about disrupting anything, they care about getting more dollars.” The last part is true – money and profit tend to drive decisions in a capitalist society – but what this particular person is missing is that the disruption is already underway. It is inevitable, and for those who are correctly positioned to take full advantage of that inevitability many more dollars will be flowing toward them as the world moves to a fantastically different financial ecosystem on the back of blockchain technology.
When the bearish rhetoric reaches this level, this fever pitch of doom and gloom spewing primarily from a group of a generation notorious for its lack of perspective and real-world experience, that’s when I start buying. I did, in fact, take the measly sum of cash languishing in my brokerage account and purchase BTC a couple hours ago, just $10 above its 24-hour low (lucky call, maybe?). That’s how convinced I am that the bulls are ready to run.
I bought bitcoin today, but that doesn’t mean you should...
I don’t predict markets. First of all I have a pathetically poor performance history in trading, whether it’s stocks or digital currencies. But today feels a lot like a specific day that I won’t soon forget from 2008 when I took a look at a handful of blue chip stocks and, having not closely followed the entirety of the preceding downtrend, had a gut feeling that many of them were ridiculously oversold. I bought DELL for $8 and CVX for something like $70, among a few others like MSFT. It was a rare moment in my overall frightening history of trading where I felt like it was obvious that those companies were hugely undervalued. Thankfully, I was correct!
I’m not saying I am correct today. And I certainly won’t be surprised if it takes weeks or even months before the downtrend in the BTC/USD market officially reverses. I’m just saying that it looks to me like a whole lot of emotions on this topic are being spewed out of the public fire hose that is Twitter, and those opinions appear to be extremely short-sighted and lacking perspective – and they’re driving financial (trading) decisions among a large group of bitcoin traders. How easy it is to forget the bigger picture, the implications of the underlying technology, and the inevitability of change that will be brought to the world by blockchain technology. To me, it’s like the early 1990s with the internet, when a few insightful people saw the long term implications of instant global communication and ubiquitous broadband connectivity. Those people are celebrated today for changing the world. I am not one of those people, but I see people just beyond the crowds of bearish day-traders who look a lot like them, building systems, products, and infrastructure that will someday make possible the incredible disruption we will witness thanks to bitcoin and its successors.