Bitcoin has seen a pretty big fall this week along with the entire crypto markets. However, some people like Tom Lee saw the pretty bullish outlook for the cryptocurrency. Even though Lee slashed his 25k price point for bitcoins end-of-the-year price earlier this week, he’s then maintained a 15k price point even amidst this current market crash. Even though experts from Bloomberg also say that Bitcoin could go as low as $1,500, they still kind of think that’s a good thing saying that that makes the coin less boring, whatever that means. Anyway we’ve talked to some experts about this including Alex Tapscott, Anthony Pompliano and Tone Vays to find out what’s going on with this market crash.
There is no cause, there is never a single cause that causes any crash. There is never a single cause that causes a big run up. Bitcoin was overpriced.
It’s been overpriced all year. Bitcoin does that. Bitcoin constantly drops 80 or 90% to make sure people know what they’re doing, that they understand why they’re in Bitcoin. And I think there are so many big buyers of Bitcoin and they weren’t buying it for the right reasons. They were buying it to make a quick buck and to be famous and to make money for their investors. And I think a lot of these people need to exit the market completely.
There’s a lot of what I call the conspiracy theories are out. Is it folks are just selling because kind of end of year stuff? Is it because of the Bitcoin Cash fork? I saw reports that said people who bought in early 2017 are starting to sell now because they’re near their cost bases. I think it could be a combination of all that. but I don’t know if it actually really matters.
I tell people that the individual reasoning is much less important than the longer term trend. We’ve been in a bear market for a while. I think we’re gonna continue to stay in that bear market until we kind of bottom out. I don’t think there’s any one particular cause to the market crash. If you look at what’s happened over the past year or so the market has been declining since an all time high in January and I think that the high that we reached was an artificial one that was based on a lot of hot money and during the sector and pushing valuations up to a level that were totally unsustainable. So I think most of the correction that we’ve seen so far has been very healthy.
I think what’s happened in the past couple of days or a couple of weeks has basically been a flight to liquidity. So effectively we’re in a period of time where there are a lot of investors who own lots of different kinds of alternative coin or things other than bitcoin basically. And as the market continues to correct they’re looking to liquidate to something that has more fungibility more liquidity. And then what’s compounding that I think is that over the past I should say about a year ago a bunch of people went and raised a lot of money for funds which are nearing the 1 year maturity date where typically investors are able to redeem and so wouldn’t be surprising if I saw a lot of those different kinds of investors redeeming now and that’s exacerbating that liquidity crunch and then compounding that, there are a lot of projects who’ve raised money over the past year who are looking at their treasury basically evaporating because they still hold a disproportionate amount in ether and bitcoin and they’re essentially trying to liquidate Fiat as quickly as possible so it’s sort of a perfect storm of a number of things.
One was valuations were too high. Number two is we’re in the midst of a prolonged bear market. And then adding on to that you’ve got this rush to liquidate which I think is causing people to take bids at any level effectively and driving prices down even more. The psychological argument is just there’s not enough pain yet People look on Twitter saying always: “it’s coming back, it’s coming back”. There’s this belief that it’s gonna be OK and I think that what that means is we haven’t reached true capitulation yet. And when we reach that, that’s kind of a psychological bottom if you will.
When you look at the technicals, there’s supports that seem to be somewhere in that 4000 to 2800. There’s multiple supports there. And so I think that we’ve kind of punch through the rest.
And so maybe some 4000 maybe 3500, 3000. But it’s definitely farther below where we are today. And then I think the other thing is the historicals.
So historical analysis does not necessarily mean that’s what’s going to happen in the future but it is a good way to get perspective. And so if you look at the first two market cycles, there was over 80 percent drawdowns, so at 75% today, which is close, but if we went to 3000 dollars and put it right about 85% off that whole time high. So I think that’s really the triangulation of multiple arguments around psychology, technicals, historically etcetera that get us into that sub 4000 dollar price point as a general target.
I’m doing my best to navigate my followers so that we can properly time the bottom. But at the moment. I don’t see it in sight. At the moment it looks to me like we can fall significantly lower than we can and it can last significantly longer.
I hope it can change because in the last few weeks people finally started to understand what a bear market can do. But I think people are still in a very happy place with Bitcoin and the Bitcoin ecosystem has this amazing ability to put everybody in a very sad place and only when that happens will the price finally bottom and then start to go to new all-time highs. There is a high probability that bitcoin will continue to go down in value. We could see sub 4000, somewhere in the 3500-3000 dollar range.
And then from the timing perspective, we think it goes into 2019, it could go as long as till Q3 of 2019. And so if that happens, we’re talking about another nine or ten months possibly of this bear market. Until there’s no true blood in the street, capitulation and people basically give up and leave the industry, I don’t think we’ve hit the bottom.
It’s really hard to say. Bitcoin can reach a thousand dollars if it falls quickly or we can stay here in the 3000-4000 range into the summer. And that would be enough. It’s not about a specific price. It’s not about a specific time.
It’s about people’s mentality. When enough people exit the system because of bad decisions and there’s nobody left to exit Bitcoin we’ll finally bottom, this may happen at a very low price of Bitcoin. This may also happen at a distant point in time. We’re 10 months into a bear market. Now in normal financial markets typically bear markets don’t last this long. But in crypto with the only precedent we have is the periods that we saw in the past and in the past we’ve seen periods where prices have corrected very quickly and we found it but we’ve also seen periods where things have continued to decline for long periods of time.
I’m looking at the market today and trying to gauge not just the financial drivers but also the emotional drivers of this market. And I think that there are a lot of people who will remain hopeful until relatively recently and now they’re very fearful and what happens after fear typically is capitulation and after capitulation people they basically just give up. So I’m not sure if we reach that artificial capitulation point yet. I wouldn’t be surprised if prices rebound here. You always get a dead cat bounce after this a period of prolonged downturns but we could retest the low and we could go even lower. All of the speculators and the tourists have sold, they’ve left.
And what you get is you’re left with this base of holders who are saying: “I’m a long term believer, I’m not going anywhere”. And there’s really that true seller fatigue and it feels like that’s probably lower than where we are today. I think that the government crack down on cash can help bitcoin go a long way as the government starts to eliminate physical cash, more and more people will be will be looking at bitcoin. If the global economy starts to go down really badly, the governments might go after people for taxes and people might be looking at Bitcoin as a bit of a safe haven. We need to have people feel that there is value in these assets and be willing to buy them not because of momentum or because of FOMO but because they’re actually valuing on what the fundamental utility could be long term. So I’m looking at a lot of projects that raise money over the past year which have yet to even launch but are coming out the next little while.
So projects like Cosmos and Polkadot for example and I’m also looking at some of the emerging networks the ones that follow Ethereum and that are now live things like EOS and Aeon, ICON, Tezos and others to start showing organic growth in terms of new application development and so reaching milestones in terms of technical maturity. So the things I look for are not really catalysts. They’re not the momentum or sentiment they’re actually fundamentals. I want to see that this technology is being used that people are actually getting value out of it and that the promise that a lot of people made is beginning to get fulfilled you know in the end ultimately the thing about technology is that people generally tend to vastly overestimate its potential in the short term and then vastly under underestimate its potential in the long term. Anybody who’s hanging their hopes on a reversal in the market because of things like a Bitcoin ETF or so-called institutional buying or you know the adoption of Bitcoin futures through bags.
I think all of the catalysts that people are looking at will be positive. But don’t hang your hat on them. You know if you’re only hoping that you know one single news event is going to change the direction of a marketplace I think you’re going to be mistaken. I think that there’s a lot more that needs to happen for this market to turn around. Yeah of course I view those things as being very positive.
One thing I will note though on this whole institutional investor side you know institutional investors have been in this industry for years. When people talk about the upcoming institutional investors they may be talking about more traditional vanilla style investors you know mutual funds and sovereign wealth funds but there are hedge funds and family offices and venture capital investors and high net worth individuals. People who have traditionally considered the institutions that I’ve been in this market for years and you know I know that firsthand and I know a lot of people who work in this industry know that as well. So I don’t think that there’s any big wave of institutional investors that’s going to you know move the needle anytime soon.
But I do think that at these valuations are going to be a lot of people looking to reload and are going to look to invest a lot of money with prices where they are. Sometimes no action is the best action. A lot of times what helps is creating a time based or periodic buying or selling schedule and then just staying super disciplined to that and saying: “Look, I’ve got long term belief in either direction of an asset and I’m going to stay disciplined” and that usually ends up being working out pretty well for people.
My advice right now is: if you were thinking of quitting your job and going into the Bitcoin ecosystem don’t do it right now. Wait another year, try to accumulate more fiat capital. And if you see Bitcoin drop below that three thousand dollar range, start accumulating that Bitcoin. This is not the time to panic sell, don’t ever panic sell and you’re better off waiting and selling at 5000 – 6000, at a little bit higher price. And if we did bottom – I don’t believe that we did – but if we did bottom at 4000 this morning and we start to go up to new all time highs that’s OK. You can buy back above 10000. The important part is buying a 10000 and you’re holding it into 50 000 -100 000.
I’ve never really understood the concept of hodling. I understand the concept of holding something long term because you think that it’s underpriced and you think the value is going to go up. But if you are looking at investment today and you think on its merits you know there’s a chance that it could go down it could go down for a while then I don’t see why you wouldn’t try and mitigate your losses and then reenter at a lower price.
And also there are practical tax reasons why you may want to sell especially if we’re going into year end to capture a capital loss. So the question of the concept of hodling I agree with the idea of owning something long term because you believe in it. But I think that holding just for the sake of holding without consideration for other facts or other factors is not necessarily the best investment strategy. If you look at the mining perspective, we’ve got people that we’ve been talking with that are mining anywhere between 4 500 – 6000. Most of those people are shutting off.
But there’s a very large portion of people who are mining at sub 3 500 dollar price points, they usually were getting either free low cost or two cents a kilowatt hour power. And this is all the traditional areas, China etcetera. So we don’t think they’re going anywhere, we think there’s a long way for the price to go before they get in jeopardy of mining at a loss. And so those are the people who are really worth paying attention to.
That’s the bulk of the miners. They’re doing it commercially and those are the ones that it would be really scary if they start to shut off the machines. If you run a very efficient, very well researched mining operation, then you’re probably doing OK. I’m pretty sure there are miners where their cost of production is between 2000 – 3000 dollars per bitcoin.
And if you’re mining operation was not properly designed, then your mining operation is going to shut down. It’s going to separate those that know what they’re doing when it comes to mining from those that don’t.