Black Friday Special on Bitcoin (You Just Have to Pick the Right One)

Happy Thanksgiving to all, as the crypto markets are wondering what’s for dinner and who is the turkey? Bitcoin is now marked down 75 percent from last Christmas (and this morning saw all 100 of the top 100 tokens on CoinMarketCap trading at a loss, the exact opposite of the early January market top). Is this new lower price a blue-light special — or pawed-over inventory from last year that nobody wants? (Bankrupt) K-Mart shoppers, what do you think?

Photo by Andre Francois on Unsplash

One week after the latest “death of bitcoin” crash (see prior 322 obituaries here), an unprecedented amount of traditional financial writers and pundits are gloating that Warren Buffett was right and bitcoin is surely now going to zero, zilch, even less than zero). Bitcoin (the original chain) is now trading at a 76.5 percent discount to its all-time high 11 months ago of $19,453.20 (CoinMarketCap average for December 16).

History may not repeat, but it often rhymes (as attributed to Mark Twain), and the price of bitcoin on Black Friday 2014 was also down 70 percent from its November 2013 high of $1,163. The price ultimately bottomed out in January 2015 to briefly hit $152 — a total drop of 86.9 percent from the market frenzy 13 months prior.

If history repeats precisely, we are facing one final, brutal downward swing (technical traders would say we are merely in “panic” mode now, with “capitulation” as the final verdict of this bear market). An 86.9 percent drop from last December’s high would take us to $2,548, about midway between various bear market predictive scenarios for the ultimate bottom. As of this writing, we are at a fundamentally “oversold” price in the low to mid $4,000s.

But stochastics, moving averages, Bollinger bands, Fibonacci sequences and Elliott waves are only half the story: fundamentals and newsworthy developments still matter (in fact, they tend to accelerate both positive and negative momentum). The main fuse that set off this latest bitcoin bomb was the war between the forking factions of Bitcoin Cash: BCH ABC and BCH SV (Satoshi’s Vision), and to a lesser extent, continued enforcement actions against US-based ICOs. I plan to write more detailed posts on each of these before the end of the holiday season.

In the meantime, I will make my early year-end predictions (note: this is not financial advice; it’s simply my personal predictions, which I’ve been making since 2013):

Unsurprisingly, I predict we will have one more bitcoin downturn in the next three months, which will be brief and severe, followed by a new, very slow, bull market that will take us to new highs of $50,000 or more by the end of 2021 (this is consistent with prior four-year “halving” cycles of bitcoin. To date, this has been remarkably predictable of bull and bear cycles.

I predict that bitcoin will remain the major crypto asset class for at least the next five years (so long as nothing breaks in its code and Satoshi does not spend any of his/her/their $1.1 million as yet unspent early coins). Craig Wright, who now claims to be Satoshi (with some credibility, as well as ample skepticism — he was certainly an early participant and has many bitcoins owned beyond the Satoshi stash) deployed the Bitcoin SV fork of Bitcoin Cash. Bitcoin Cash itself was a contentious fork from bitcoin from last August to solve scaling issues and lower fees, which ended up being “fixed” a few months later upon the successful implantation of Segregated Witness protocol, aka SegWit.

Now all three sides — Bitcoin Core (BTC), Bitcoin Cash (BCH) and Bitcoin Cash Satoshi Vision (BCH SV), so named by Wright as it is the 0.1 version of bitcoin, which he says (with his Satoshi hat on) was perfect and should never have been altered. Is Craig Wright the Real Satoshi or Faketoshi? Original bitcoin purist or Machiavellian opportunist? The fate of BTC most likely rests in whether this is fact or fiction. And this is the main reason the markets are still unstable and unlikely to sustain any upward momentum until this is decided: win, lose or draw.

Finally, I predict that “altcoins” (particularly “Dapps”)– left for dead by many after their 70–99 percent drops will have a bifurcated future: the money grabs with no real product, demand or community (or hounded by regulators and class action lawyers, right or wrong) will likely fold up shop (voluntarily or forcefully) and their tokens will gradually drift toward zero (or their chains will be taken over and relaunched, somewhat akin to what happens with reverse mergers in the pink sheets).

But the solid infrastructure blockchains (Neo, NEM, Lisk, Qtum, EOS, etc.), crypto payment platforms (Dash, Monero, ZCash, Ripple, Stellar), and even reasonably well-adopted application tokens (e.g., Augur, Factom, WAX) as well as promising ones still in pre-launch mode (too numerous to mention, including many I advised or my firm helped with PR, so I don’t want to do a laundry list of favorites here) will rebound from these depths at a rate equal to or higher than bitcoin. The jury on Ethereum is still out: it has the largest developer community, but it’s the Ethereum Virtual Machine (EVM) that powers smart contracts and digital assets, not necessarily ETH the cryptocurrency. This is an opportunity for Ethereum Classic and other tokens running the EVM protocol (including a new one under development I’m involved with, Aspire), as well as a challenge for the Ethereum Foundation to keep the developers on their chain instead of new, perhaps improved ones running the same basic code.

Photo by Pawel Janiak on Unsplash

In the meantime, if you’re a long-term holder (aka “hodler”) you can just sit this last piece of winter out and set your clock for 2020 to start paying attention again (or whenever you see a Satoshi-owned coin move anywhere). If you’ve never owned bitcoin, it’s a reasonable time of the market cycle to start cost-averaging in as a long-term buy at current prices, as well as put in buy orders for the ultimate “blood in the streets” pricing at $3500, $3000 and $2500 in case the final capitulation swoon happens. Just be ready to cancel those order if the Satoshi coins move.