Bitcoin: The Runaway Train

by JDH on January 9, 2021

Interesting week, eh?  I don’t mean politics.  I don’t care about that.  I assume it’s all theatre.  I mean the crypto world.

I won’t bother showing you the charts, because they change every minute, 24-7, but I can tell you that on January 1, 2021 Bitcoin traded at $28,572, and it peaked on January 8 at just shy of $42,000.  Yes, that’s an almost 47% gain in 8 days.

At that rate, Bitcoin will be trading at one hundred gazillion dollars by the end of next week.

Ether, the second-largest cryptocurrency, started the year at $724, and peaked just shy of $1,300 USD on January 8, for a gain of almost 80%.

Crazy.

The obvious conclusion is that nothing goes up that fast, so a hard crash is imminent, perhaps in the range of 50% to 80%.

Perhaps, but even if Bitcoin collapses by 50%, that only puts it back to $20,000, which is where it was trading in the middle of December.  Not exactly a life-altering crash.

In contrast, gold is trading at about the same level it was trading at in the middle of December.

It’s easy to see why Bitcoin is soaring.  Assuming Joe Biden is inaugurated (and in this crazy world, until it happens, it hasn’t happened), he has promised trillions of dollars in stimulus.  That will continue the descent of the US dollar, which will continue the rise of Bitcoin.  But should that also not cause gold to go up?

Yes, it should, but it would appear that the institutional players are allocating the “inflation hedge” or “risk-on” portion of their portfolios away from gold, into crypto.

Makes sense.  If crypto goes up 40% every week, you can’t afford to not have a small portion of your portfolio in Bitcoin, or Ether, or whatever.  Now that everyone is doing it, you can’t afford to lag the crowd by not doing it, so everyone is doing it.

Two things appear inevitable to me:

Bitcoin will suffer a 20% to 30% correction, probably once a month, but it won’t matter, because everyone will buy the dip, and we will see $100,000 Bitcoin in a few months.

Crazy, but that’s the way I see it.

Enjoy the ride.  Try not to get wiped out.  See you next week.