Is Bitcoin in a Bubble? Don’t You Feel Silly Now?
Quick Update: The price per Bitcoin price is trading over $15,000 now — everything in this post still applies!
As Bitcoin hit $11,000, I got an email from one of my financial advisors, sending an article that predicts that Bitcoin is a bubble that’s about to burst, and echoing advice that she and others in the finance industry have told me before: it’s time to get out.
Once, I even listened, but I regretted it almost immediately.
The truth is, if like me, you’ve been in Bitcoin for a few years, you’ll know that people in the traditional finance world have been predicting the collapse of Bitcoin for a long time.
It’s important to understand the history because these well-meaning people are often right and wrong at the same time (though usually they don’t own any bitcoin of their own so be careful whose advice you listen to!).
When I first started buying bitcoin in 2013, it wasn’t easy to do so. Most exchanges and sites were outside the US. I literally used to meet bitcoin buyers in downtown Mountain View, and hand them over $120 in cash and they would transfer 1 bitcoin to me.
That year, the price of bitcoin started rising and ended up over $200! I thought that it was a big jump and that bitcoin had finally “arrived”. Traditional financial people started to call it a bubble while tech guys called it a “revolutionary new technology”.
And then something funny happened. Bitcoin crashed and lost nearly half of its value! Don’t believe me, here’s an article from April, 2013:
I decided not to listen, but to keep buying. Another funny thing happened. Bitcoin started rising again and got to over $1000 per Bitcion.
Traditional finance people started to call it a bubble, while tech guys were saying that it was a revolutionary new technology. I remember at least one prominent VC in Silicon Valley telling me I was wasting my time.
Then of course, like the naysayers predicted, Bitcoin had a BIG crash, partly because of the news that China was banning exchanges and fiat to Bitcoin transactions. Bitcion fell to under $600 after reaching $1200, and the LA Times asked:
It was a good question. One that should be asked more often to people who pontificate in the world of crypto currency: Don’t You Feel Silly Now? (surely, someone should ask the LA times reporter who wrote that article this question, but somehow I doubt anyone will).
In reality, I didn’t feel silly at all, but decided to buy a few more bitcoin at the lower price and waited.
But then … not much happened.Slowly the people that were serious about crypto kept going and it seemed like the rest of the financial and tech world forgot about bitcoin.
Then of course, Bitcoin came back this year with ICOs and now it wasn’t just Bitcion, Ether also had a dramatic rise. Bitcoin got back to $1000. As usual, the “advice” started pouring in from friends and “advisors” in the VC industry — “I hope you sold your bitcoin, it’s another bubble!”.
Then it reached $2900 and forbes wrote:
Then, as Bitcoin passed $3000, and briefly hit $4000, the calls to sell were getting louder from friends and financial people, including the CEO of JP Morgan Chase called bitcoin a fraud!
Once again, China started to ban bitcoin exchanges and the value of bitcoin crashed! Maybe Dimon was right. Bitcoin fell from a high of over $4000 down to $3000 — another big drop!
All this time, people were telling me to sell; but having seen a few Bitcoin crashes I decided to hold on and buy a little bit more at ~$3300. Before I could even place the buy order it was back up to $3800!
As Japan and other countries took up the slack for China, and as the inventive Chinese individuals found ways to get around the various government restrictions, the price of Bitcion started to rise again.
Then it hit $6000! My financial advisor suggested I should sell some of my bitcoin. Although I had been ignoring this advice all along, I gave in and sold a little bit telling myself I was just “being prudent” and “protecting my downside”.
Almost as soon as I sold it, my gut told me this was the wrong decision. Then a funny thing happened. Bitcoin shot up to $7500. Bitcoin fell again under $7k, and I decided to re-buy my bitcoin, but before I could do so it shot back up to $8k! Damn. This is what I got for listening to financial advice.
Suddenly friends of mine who told me to sell bitcoin because it was a bubble at $2k and $3k were trying to buy some bitcoin for themselves! Yes, they were buying at $8k per bitcoin when they told me I should sell at $2k because it was too expensive!
Today, the predictions are back. Here’s a piece from just this morning on Market Watch, telling us that there isa n 80% chance of a Bitcoin crash and it’s certain!
The subtitle on this piece is: 40% plunge in the cryptocurrency’s price is ‘nearly certain’
The question is should you listen to the pundits? Is it time to sell your Bitcoin?
My opinion is that they are probably right, the price of bitcoin will crash — it always has and probably will again!
For now, perhaps we need to ask that question of the financial industry, who will surely ask it of us again after the next trash?
Don’t You Feel Silly Now?
The next time I get asked that question, I’ll probably start buying bitcoin again because it means it’s one of Bitcoin’s inevitable, temporary crashes!
NOTE: I am not a financial advisor and this piece is purely my own opinion. I personally own bitcoin and other cryptocurrency and blockchain startups. My personal website is at www.zenentrepreneur.com