Every time Bitcoin makes new moves to all time highs it is called a bubble. Every time Bitcoin “crashes” by 30% it is dead. The truth is that neither are the case. This is what the monetization of Bitcoin looks like. It is the natural progression of Bitcoin becoming widely accepted as money.
It is not a Bubble
I had a number of people not know what a bubble is, in financial terms. I’ll let Investopedia handle this definition:
A bubble is an economic cycle that is characterized by the rapid escalation of market value, particularly in the price of assets. This fast inflation is followed by a quick decrease in value, or a contraction, that is sometimes referred to as a "crash" or a "bubble burst." — Investopedia
In laymen’s terms, it’s when the price of an asset rises too quickly, to prices that seem too high to be reasonable for the general market. There are two reasons why Bitcoin is not a bubble.
Bubbles that pop, usually stay popped, or take a very long time to recover
The existence of Bitcoin’s 4-year macro cycle
While I will recognize that Bitcoin goes through, and has gone through micro-bubbles in the past, I maintain that the macro event taking place is the monetization of Bitcoin.
The Tulip Bubble
The first instance of a bubble in semi-recent past is the tulip bubble in 1637; Also known as “Tulip Mania”1. During this time, tulip bulbs (or contracts representing ownership over them) were traded amongst the dutch and the french in a speculative frenzy. Some tulip bulbs ended up being equivalent in value to an entire house, or 12 acres of land2.
The .com Bubble
The more recent bubble we can look at is the .com bubble in the late 1990’s. The price of tech companies stock rose overnight if they added “.com” to their company name. Every company with a website become a multi-million dollar enterprise overnight. This is similar to how companies in the last few years have been adding “blockchain” and “crypto” to their names, (Yes I’m aware I co-founded Atlantic Blockchain Company, and Go Full Crypto).
No Bubble has Already Popped 4 Times
Bitcoin doesn’t have the characteristics of any of the bubbles we’ve recorded in the past.
If Bitcoin is a bubble, then it is the first of its kind
Bitcoin started from a price of 0, and has risen to $50k USD in a span of 12 years. It had roughly 4 stopping points on its way to this high. $1, $10, $1000 and $20,0000. Each of those price markets are more or less the peak of its subsequent correction. When non-bitcoin bubbles of the past have popped, they didn’t see new highs magnitudes beyond the last high. They corrected, and remained depressed.
Bitcoin is not Dead when it Goes Down. Ever.
Among the most ridiculous things I hear about Bitcoin, is the pronouncement that it is dead. If you haven’t already checked out the Bitcoin Obituaries, I recommend you do so. Bitcoin has been declared dead more than 400 times in the past.3 Yet Bitcoin has gone on to set new all time highs (ATHs) this past week. Is Bitcoin a Zombie? Or are these people just wrong?
Declaring Bitcoin dead only seems to accomplish an approximation of its price.4 Bitcoin is clearly not dead, and not going to die. It’s actually in the middle of becoming money.
Bitcoin is Becoming Money
What we are watching in real time, is the Bitcoin monetization event. If we could go back in time, and watch as gold itself became the internationally accepted Store of Value (SoV), Medium of Exchange (MoE), and Unit of Account (UoA), I surmise that we would see something awfully similar to what is happening with Bitcoin. What Bitcoin is doing, is outcompeting every single other form of money there is on this planet, including gold.
Bitcoin the Store of Value
We can derive a lot of meaning behind the trends in the last 12 months. Bitcoin rebounded faster than the cash-injected S&P 500 in March of 2020. Bitcoin then performed better than any other asset for the remainder of that year. Bitcoin started being purchased by the billion by some of the largest companies in the world. Now companies everywhere are sitting in their board rooms, and having the same conversation about converting cash reserves into Bitcoin. What this ultimately means for these companies, is they’ve decided that Bitcoin is a better store of value than the global reserve currency (USD).
Beyond Store of Value
So now that Bitcoin has ascertained the first attribute of money (SoV), it is primed to conquer the next two. In order for Bitcoin to become a UoA and a MoE, it needs to be accepted, and used, in the majority of transactions around the planet. For this, we may need to wait for the next Bitcoin MacroCycle. Until then, Bitcoin is the best store of value of the planet, and if you’re reading this, then you’re among those who know it.
Tulip Mania - https://en.wikipedia.org/wiki/Tulip_mania
Value of One Tulip - https://en.wikipedia.org/wiki/Tulip_mania#Rational_explanations
Bitcoin Obituaries - https://99bitcoins.com/bitcoin-obituaries/
Bitcoin is Dead Chart - https://earlyinvesting.com/bitcoin-still-isnt-dead/