Bitcoin’s bull run: This is what’s different compared to 2017
A roadmap towards trust and mainstream adoption & Why it is always a good time to buy Bitcoin
Bitcoin is going through a very crucial phase right now. It just entered the realm of 5 digits, it’s price rose above the psychological very important $10K barrier. And hopped right into $11k within hours on June 22nd. I believe that this impressive price action reflects something far more important at the flip side of the Bit-coin: BTC’s roadmap towards global acceptance.
What is driving the current price rise? 99% of people in the crypto trade space are convinced the 2018 bear market is over. Personally, I believe that something different is going on compared to the late 2017 bull cycle. From these observations, I also conclude that we won’t go back again to $6k, $8k or even under $10k. We might never see a bitcoin in our lives under $10k. Isn’t that exciting? Let me give 4 arguments about why it is always a good time to buy Bitcoin.
Retail money versus Institutional money: The store of value argument
When Bitcoin busted the $10k barrier in November 2017, a media hype was born. Every major newspaper printed articles about the rise of Bitcoin and what the heck a Blockchain actually is. A tsunami of Bitcoin information flooded social media, followed by advice on how to embark this free ride of money accumulation. By the time the mainstream figured out how to buy Bitcoin, the price was $14k. Then, when finally, after days of waiting for their exchange accepted their KYC, it was $18k. Just for your memory, Bitcoin went from $11.700 within 2 days to $17.350. There was such an influx of exchange subscriptions, that Binance, Coinbase, Kraken and others needed days to KYC all those newbies. And then a lot of people lost their money when on the other side of $19k, Bitcoin slid down in the abyss of the 2018 bear market. Trust was broken for many in the mainstream that followed the media talking about free money and a huge opportunity.
The bitter taste of the 2018 loss is translated in the believe by many that Bitcoin is too volatile to become ever a stable store of Value.
It is easy though to break this myth. Only in the very last part of the crazy 2017 bull run, it was maybe unwise to buy Bitcoin. Compared to its 10 years of existence, this is less than 0,3% of the total opportunity to buy Bitcoin. This is visually shown in the graph below. The red box represents 2017 late bull run and the wrong time to buy BTC. The Blue box Bitcoins more than 10 years of existence. To put this in other words, in ALL of the other periods within Bitcoins existence, it was in fact a good idea to buy Bitcoin when you look at possible future returns. So Bitcoin is and will be an amazing store of Value. And this is exactly what Financial institutions are discovering and accepting at this moment. When the 2017 bull run was all about hype and retail money, the current rise of value is about Institutional money flooding in. And they are in for the long run!
I need to add up here another reason for Institutional money to enter the crypto space: Geopolitical circumstances. The International political climate is getting more and more unstable and tension is rising. I mention here the US trade war with China, the recent drone incident with Iran, the election of the populist Bolsonaro in Brazil and coming elections in hyperinflation nation Argentina in 2019. And not to forget the ongoing tension between the US and Venezuela, a country with more and more internal tension under Maduro. We see increasing mass protests against economic inequality in France and other European countries, Italy possibly following as a result of the tax increase to stabilize its weak position in the EU. Even a very stable economic entity like Hong Kong has seen more than 2 million people in the streets very recently protesting against an extradition bill.
What is the result of political-economic uncertainty? Gold went up to $50 a few days ago. A clear sign of Financial Institutions and individuals looking for safe havens to store their money as a result of declining trust in the Dollar. But not only in Gold. Bitcoin is slowly entering the league of being seen as a safe and secure Store of Value. Despite its Volatility. People are getting it: The underlying Bitcoin network cannot be shut down anymore, the price will continue to rise, the community is open source, inspired and dedicated to solving the issues of scalability and transaction speed. When Bitcoin won’t possibly become the world’s digital cash app, it might become the world new digital store of value, possibly replacing Gold in some tech future. Having said that, Gold is valued at 7 trillion, Bitcoin just under 200 billion market cap. A long way to go, but the green flags are definitively up for big piles of institutional money entering the Bitcoin and also Ethereum ecosystems, validating their long term legitimacy.
Facebook’s dance with Crypto.
Mark Zuckerberg’s dance with crypto is positive for Bitcoin and the crypto space. When Facebook eventually manages to get their digital money working, this will become a massive instrument for people to start using digital app-money in the first place, and it will probably break the still existing barrier to even look into the real stuff: the real decentralized crypto out there. Even the usage of the words Cryptocurrency and Blockchain in their whitepaper and recent press releases around Facebook's worldwide media release on June 18th helps to further initiate massive interest and eventually trust and acceptance of crypto, be it decentralized or not.
A survey by Kaspersky Labs from February 2019 teaches us that about 13 per cent of people has used cryptocurrency as a payment method. The study collected responses from more than 12,000 consumers in 22 different countries. Assuming that these are the Wests top economic countries, the report does not show how many people use crypto in hyperinflation countries where crypto payments are really needed. More about this later.
Data from Coinmap shows that businesses that accept Bitcoin across the globe have increased by 702 per cent since December 2013. When millions of users start using Facebook and Whatsapp as a means of payment and a store of value, the step to use it outside of these apps will increase rapidly. This reminds me of the initial phase of banking apps. When you lived in the times that you needed to sign a paper transfer sheet, post it in an envelope and wait a week until your bank received your envelope and processed the transfer, then suddenly login into your bank and doing this digital felt strange and unsafe for many. People would rather keep on using the envelope until the very last month the banks took out this system. The same here. Once people figure out how fast, safe and easy it is to transfer money with phone apps, millions of people that do use Facebook but were still afraid of PayPal, will feel much more appeal to enter the age of digital banking, thanks to Facebook.
The number of people that really need Bitcoin will only increase
The people that really need crypto for securing their money against hyperinflation or government freezing are another not to underestimate force in the further growth, acceptance and real-life usage of crypto despite ups and downs, bull markets or bear markets. In fact, you can place Argentinians in the small 0,3% red DON’T BUY BITCOIN rectangle in the chart above, and they still have been better off than keeping that value in the countries native currency the Peso in the bank.
Data from coin.dance shows that weekly volume of Bitcoin in Argentina continues to rise and reaches all-time highs. This trend is definitely no different in nations like Venezuela that are in the same hyperinflation boat, struggling to keep the country and its people above water. At the same time, more and more online and offline retailers are offering payments in crypto in these countries. In fact, the BTC acceptance heat map for the north of South America looks a lot different than it did six years ago.
It is logical that people that need crypto the most for its intrinsic store of value, are becoming increasingly more important for mainstream adoption since their number grows weekly. Compared to the big heaps of fiat entering crypto via financial institutions right now, the record $14 million around the 11th of may entering crypto in Argentina might look tiny, but you need to count up all these numbers of all the hyperinflation countries and you will see increasing numbers for the years to come. Why? because of the reason mentioned above, the geopolitical increasing uncertainty. Venezuelans, people from Sudan or Zimbabwe, and even people in Turkey will become increasingly interested in storing their hard earned money in something that cannot be seized or censored, because their governments will prove to be less and less trustworthy and more and more corrupt. When this group of people find out that at the end of the day, Facebook is not an option since Marc can seize or freeze their money too, only the real digital decentralized crypto’s will become their financial safe haven.
The recent move of Bitcoin above $10k has a different ground than the ’17 bull run, and because of the above-mentioned reasons and dynamics, the recent bull run is more sustainable than in ’17.
Crypto is getting serious and on a rapid growth spurt towards adulthood
Banks and financial institutions have entered phase 4 of the 5 stages of grief. They join out of growing understanding of the underlying value, and when you can’t beat them, join them. And out of downright FOMO, or they copy like Facebook tries to do and some banks are doing like JPM Coin. These recent developments increase the trust in crypto. Media is getting milder, and on its way to $20k, retail money will FOMO in too.
I hope this shows you that buying Bitcoin is always a good idea, as it always has been. (This is my own opinion, not financial advice) And despite the coming of age of crypto, in the core, I believe and silently hope that crypto will always remain young, rebellious and unpredictable. It is in the protocols, it’s in the blockchain heartbeat, and its the same thing that makes them so damn attractive and seductive, since they have the promise to disturb the complete economic system. Bitcoin and crypto hopefully will never become centralized, boring, predictable and obsolete.
Lucien Lecarme, June 24th 2019