I'm calling a clock on this crypto cycle mania (bull market if you are so inclined). I don't know when it will end, but by Spidey sense says very soon. A couple of things have me thinking the fun is coming to an end.
The charts have all gone parabolic in spectacular fashion. The 2017 crypto bubble is now just a blip:-
Since the March 2020 lows Bitcoin has return about 11,000% and has roughly doubled since the start of 2021 alone.
I'm not sure what comes first: the price action or the hype. Either people are hyped about bitcoin causing the price action, or people get hyped about bitcoin because of the price action. Probably some combination of both in varying degrees as time goes on.
There is no doubt intense debate around bitcoin, rightly or wrongly. Me? I don't care for the debate either way - when the price goes vertical like this on any asset/token it's likely a mania.
Coinbase, probably the West's most popular crypto exchange, came public this week in a direct listing. Direct listing is important for two reasons 1) It's not an IPO. They are not raising capital - they don't need capital, it's a profitable company 2) There is no lockup period on direct listings as with IPOs. All of the shares offered to the public come from insiders who are selling.
The employees and investors at Coinbase no doubt have to be some of the most dedicated believers in the crypto space. They own a piece of one of the most popular crypto exchanges on the planet, it's profitable, and crypto forecasts call for Bitcoin anywhere in the range of $100k to $1mn. When even they want to cash in on the recent price action it's cause for concern.
The British (are coming!)
I've said it before and I'll say it again - UK investing culture fucking sucks. Unless you work for a bank in London, no one talks stocks. It's almost taboo.
When UK retail investors start to pile into an asset, and the people in my everyday life start to talk about individual stocks (tokens), alarm bells go off in my head.
My friends know me as a stock market investor, but we rarely talk about it. In January I went to a party and the first question everyone asked me was, "What's going on with this Gamestop stuff?". That took me back.
This week I was on a professional course at work and my tutor asked everyone on Friday morning's webinar if they were watching the price of Dogecoin. He was happy to report later in the afternoon that his "bitcoin-y stuff" had run from £120 that morning to £160 in the afternoon.
On Twitter this week the terms Bitcoin, Coinbase, #dogecoin, and later just 'doge' were all trending in the UK.
which brings me to my final point...
Even if you are a crypto bull, you would probably concede that Dogecoin is a joke, right? (As a crypto sceptic, I would ask what is the difference is between it and bitcoin?)
The dogecoin price action of late is the final nail in the coffin for me, and what gives me the conviction to say the party is coming to an end relatively soon-ish:-
The joke token has run from $0.0054 per Dogecoin at the start of 2021 to a high of $0.43 as of last week. A return in the neighbourhood of 800,000% within 16 weeks.
I highlighted on Twitter yesterday, as a sure sign of speculation, that to accompany a doubling (and later a tripling) of the Dogecoin price, the 24hr volume of Dogecoin exceeded the total supply of Dogecoin:-
The meaning? No one is interested in holding this (these) token(s) for any meaningful amount of time. Everyone is just hoping to get in and flip it for a profit. It's pure speculation.
I have seen the same dynamic play out in the past in stocks such as Tilray, Beyond Meat, and GameStop to name a few.
So I am calling a clock on the crypto party. The charts are parabolic, the insiders want out, the ever-shy Brits have joined the party, and speculation is rampant in a joke coin.
To be clear I am not calling for an immediate top in prices. In such a mania prices could easily double on a whim. But I am willing to say with 90% confidence that prices will be lower within 6 months maybe, 18 months definitely.
If I am wrong, I will eat a shoe.
Fund my habit of eating shoes:-
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