Bitcoin Macro-Trends: The Real Bubble in Bitcoin Is Yet to Form

[Magician]

Bitcoin has been compared to various asset classes over the years. The most robust comparison made is with ‘gold’ because of its limited supply and utility as a store of value. Moreover, Bitcoin is more often than not termed as ‘Digital Gold.’ However, together with the cryptocurrencies Bitcoin is now more than a commodity, it forms the basis of the FinTech Industry.

If industrial Macro Trends are to be recognized, industrial production in the 1930s and the Dot-Com bubble in the 1990s  are two most prominent economic movements in the US in the last 100 years. The dot-com bubble analogy has always been used to describe the price characteristics of Bitcoin and cryptocurrencies due to the network effect. Moreover, the Dow Jones Industrial average finds close relevance with Bitcoin and cryptocurrencies in terms of the price and market sentiments.

Dow Jones Industrial Average

The Dow Jones Industrial Average has served as the benchmark index for the Industrial Production in the US. During 1930, the Dow Jones Industrial Average grew to a staggering value above $5000. However, soon the depression took over, and the index dropped by more than 85% in two years (1932). Furthermore, it reached above $3300, about 60% from its ATH mark after four years. For Bitcoin, that level would be about $11,000.

Nevertheless, the timelines of these events are 100 years apart. Globalization through the internet and a plethora of financial instruments in place today offers for quicker resolve and adoption of new things.

Dow Jones Industrial Average over 100 years (Marcrotrends.net)

The Dot-Com Bubble

For more than 25 years the US Government had limited the use of the internet for Government related purposes only. However, in 1994, the internet became available to the general public. The various new internet companies were soon listed through an IPO which raised millions of dollars in less than a year. At its peak, the NASDAQ market capitalization during the dot-com bubble was approximately $6.7 trillion.

The cryptocurrency bubble was just around $800 billion during 2017. For Bitcoin, the institutional support currently offered to it is custody, which is led by Fidelity Investments, Gemini Trust and CoinBase. In December 2017, CME and Cboe Exchanges also enabled futures trading of Bitcoin. Moreover, traditional exchanges have also been given regulatory approval under compliance with their rules and guidelines.

Nevertheless, the Bakkt and SEC approval of Bitcoin ETFs and its direct legalization as a currency or any other asset are still pending. Moreover, technologically as well, a lot of progress is yet to be made by most of the top cryptocurrencies including Bitcoin.

BTC/USD All Time Chart (TradingView)

Hence, while the Bulls and the Bears continue to tussle over the price of Bitcoin, there is a bigger picture to it which the traders might be over-looking. While the bottom might be confirmed, there is still no reason that Bitcoin might not re-visit its yearly lows.

Bitcoin Macro, a popular crypto influencer on Twitter might have righteously summed the current Plan of Action (PoA) for the traders:

The bear market isn’t over yet. Don’t listen to those telling you that we’re in the clear. We are not there yet. $BTC could easily go to new yearly lows, even if we break $6k. Anything can happen from here. Don’t be a bear, don’t be a bull. Be on your toes, and have no bias.

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