Popping the Crypto Bubble

I've been bearish (medium term) on Bitcoin and other crypto currencies for a long time, and have sold most of mine. I sold half at $700 when it first doubled from my buy-in price. The crypto currency bubble of 2017-2018 was much larger than I expected.

While it is incredibly difficult to make accurate predictions, I'm trying. For the past several months (maybe mid-2017), I've been thinking we're overdue for a long bear market similar to 2013-2015. And the more the price increased, the more prolonged and deeper the bear market will be.

So I now expect a 12-18 month bear market (started in December 2017) and a dramatic fall in bitcoin to perhaps $3000 (of course it could fall as low as $1k or only bottom out at $5k). Though if you compare now to 2013-2014, it is possible that we're falling about twice as fast. So the time line could be sped up.

I think the bottom of the bear market will be preceded by a larger decline in the alt-coins and ICO tokens. Perhaps Bitcoin market share will increase to 55-70% of the total crypto market cap (currently 44%, up from a low of 34% when Bitcoin hit $5900). The sell off may be triggered by regulation (a crackdown on ICOs), or just the logical outcome of a bubble. So a possible indicator that I'm using to buy more bitcoin is to wait until the alt-coins are pummelled.

I expect we could see another bull market in 2020-2021 - as existing projects and companies that were initiated during the 2017 bull market, start to produce results. And we'll probably see the next bitcoin mining reward halving in 2020. (Or in the case of ICOs, we might see a strong bear market as their products fail.)

All of this could be offset by a global economic recession. We're overdue for one in the next 1-3 years. The next recession will hurt the stock market, property market, commodities, and crypto currency.

So far Bitcoin has fallen to $5900. However we haven't seen the level of despair that I'd associate with the bottom. Ethereum and Ripple are down a lot for 2018, but still have further to fall. Ethereum lacks use cases (Distributed Applications are a complete failure so far), and Ripple has use cases - but you don't need the token to do them. We have had a huge number of new people "investing" (really gambling) in crypto currency over the past year. Many of them have seen their investments increase by 10x or even 100x. It is impossible for people to be rational with these insane gains. There are countless YouTubers with investment advice, most having joined in the past 15 months. There are literally organized pump and dump groups for altcoins and ICOs. They need to lose their shirts before we hit bottom. They didn't live through the wreckage of 2013-2014 and aren't ready for it. They also didn't do due diligence. Just like the people who invested in the late nineties tech (and telecommunications network) bubble in the US - people overpaid for projects that don't have products or use cases. They just have names, advisors, and "white papers".

Bitcoin's main use is speculation. It's a highly speculative store of wealth which is perhaps the second or third most volatile "currency" in the world. It's main attraction is that while the Zimbabwean dollar goes down, Bitcoin is more likely to go up (of course that is "so far" - the past doesn't reliably predict the future).

I recommend reading books on bubbles. For instance I enjoyed the insights and humour of: "The Great Taiwan Bubble: The Rise and Fall of an Emerging Stock Market by Steven R. Champion "

We have no idea what will happen with "Satoshi's" bitcoins (possibly 1 million). We have no idea what will happen with the MtGox bankruptcy coins (about 200,000 - some of them already sold).

This is not professional financial advice. I'm guessing.