This is Not Hopium
When I share this opinion, I am often accused of hopium. The reality is, I would love a crash down to $10k BTC. I have funds in other assets that I want to use for buying cheap crypto.
I am not even arguing that we won’t see a major crash. I hope we do.
My argument is that the last three cycles don’t give us enough data for serious statistical analysis, and even if they did, it would not matter.
Here is why.
There Isn’t Enough Data
In traditional financial markets, analysis is based on decades of data, because the data exists.
How many cycles have we had in Bitcoin before this one?
Three. 2011, 2013, 2017.
This is not enough data.
Sit on a park bench and watch cars go by. The first car you see is red, the second car you see is red, the third is the same.
Is it safe to assume that the next three will be red?
Obviously not.
Is it safe to assume that red is the most popular colour for cars in that town?
No.
At the very least, can we assume that the next car that drives by will be red?
No.
Three data points aren’t enough. In statistical analysis, you require 30 data points, and many argue that 30 is too low.
Basing future predictions on three data points is dangerous.
Market Participants Have Changed
In 2013 BTC was traded almost exclusively by enthusiasts as the tech barrier for entry was high.
In 2017 BTC was traded by enthusiasts, a handful of institutions, the tech barrier was still high, but it had been lowered allowing more retail money to come in.
In 2020 BTC has become one of the most recognized and traded assets in the world. Institutional volume outweighs retail. Anyone with a credit card can max it out on BTC as there is almost no tech barrier.
If I am correct and BTC is now driven primarily by institutional investors, then market psychology has shifted.
Institutional investors have different goals from retail investors, and they have the power to manifest those goals by manipulating the narrative in the media.
When the market is no longer driven by retail investors, or by retail whales, the behaviour of the market changes.
What’s BTC Going To Do?
I am not convinced we will see a bear market like the ones we have seen in the past.
I think the next major crash will be shallower and shorter than the last. We might not even see a major crash until we get a black swan event.
We will see deep retraces, like in every market, 50% or more.
I just don’t think it will be as extreme or long-lasting as the last bear markets. Institutional investors aren’t waiting around 2 years for BTC to get fun again.
This is simply my opinion, it is not financial advice.
I hope the dips come because I am ready and willing to buy. I hope I am wrong, so I can buy at an 80% discount.