When considering my overall experience with Bitcoin; going back to late 2013, when I owned a small amount at Mt Gox - but principally since I went all-in in early 2016 – what stands out most is the lack of financial savvy of the crypto sector in general. Yes, an industry dominated by 20- and 30-somethings has the benefits of youthful energy – and conversely, the handicap of an investment class dominated by those with limited (and in many cases, zero) financial experience. Truth be told, it also lacks a work ethic matching the “get rich quick” excitement of owning tokens – like the dotcom era, but with a LOT younger average age. I mean, I’m 48 years old, and publish more FREE content than essentially anyone in the ENTIRE crypto community.
As in every sector I’ve worked or invested in; from energy, to mining, bullion, and crypto; my views have continually evolved - ESPECIALLY in crypto, given the “double dog years” development pace of this unprecedented, unparalleled, unfathomably complex and cool technology.
In crypto, I was the equivalent of a “Bitcoin Maximalist” early on – more so due to the risk aversity I built up over three decades of investing, than blind hatred of altcoins. That said, as the space developed, it became obvious that nearly all of the current alt crop are useless – including many scams, and dozens of ERC tokens and Bitcoin forks created solely to pump-and-dump on the heels of Bitcoin and Ethereum’s success.
Until the FREE BRhodium airdrop last year, all I ever owned was Bitcoin…with the exception of a 7% position in Litecoin in early 2017 - which at the time, I viewed as “silver to Bitcoin’s gold”; that I sold for Bitcoin the second SegWit locked in last summer. Afterwards, it was all Bitcoin – particularly after the bear market commenced in December, and exploded lower in February.
That said, I was always open to new ideas – as given my Wall Street background, CFA designation (since 1998), and 30 years of financial market experience, in every imaginable sector, I think the way “big money” thinks. Thus, no matter how much I loved gold’s potential to be the money of the future last decade; and Bitcoin, now; I understand fully that in the big money’s eyes, Bitcoin, altcoins, and gold are merely financial assets to be traded in and out of - to maximize profits in good times, and preserve capital in bad. As for altcoins, there may not be many worth investing in now, that doesn’t mean there won’t be later – ESPECIALLY if one believes, as all Bitcoin investors do, that a new bull market is inevitable.
The past year has been a case study of how the “smart” and “dumb” money act. Both lose lots of money most of the time - but the smart money typically loses less, and learns lessons more quickly. This is why Wall Street has been so leery of the space all year, whilst hard core Bitcoin maximalists believe nothing can go wrong – so long as you have faith and “HODL.” To that end, hearing Trace Mayer tell the Bitcoin community to be “HODLers of last resort make me nauseous – akin to Hitler telling his troops to continue marching into Russia during the heart of winter.
From the big picture perspective, big money has little technological expertise, and generate all its wealth via legacy asset classes in a fiat-dominated world. Thus, it couldn’t care less about Bitcoin’s ideals – and likely, won’t for many years to come. What big money cared about was the BULL MARKET – ESPECIALLY when it rose above the “Hoffman Line”; i.e, the $100 billion market cap level where it becomes investable by most institutions. Even then, only the nimblest – and frankly, smallest big money players could capitalize, given that custodial solutions (like ETFs) were non-existent.
True, the bigger players spent 2018 doing their due diligence – under the expectation of upcoming custodial solutions and maintenance of the Hoffman Line. However, when the solutions weren’t rolled out – like Bakkt and SolidX/VanEck, for example; they started to lose interest…and when the Hoffman Line broke, they lost interest entirely. Heck, the catalyst for it breaking wasn’t even major news – as incredibly, despite having won the scaling wars last year, Bitcoin has been undone by a fork of BCash, just as BCash was itself collapsing. In my view, this is a VERY bad near-term sign – which is why I sold my Bitcoin when the Hoffman Line broke.
As someone who lives and breathes crypto, having made hundreds of transactions – I realize how amazing the technology is, and how it appears destined for monetary greatness. However, as an investor who understands how big money thinks, I am well aware what a horrible setback this crash is. Those who say “price doesn’t matter” are in my view either idiots or dis-ingenuine – as without higher prices, there will NEVER be widespread Bitcoin adoption…and in turn, the potential for the moonshot prices investors so desperately want.
Which brings me to my last point…of how the “big” and “small” money actually think very much alike - in that no matter what they SAY, what they actually CARE ABOUT is one thing, and one thing only…MONEY.
Sure, when times were good, everyone espoused how crypto was going to take over the world, and blockchains would dominate every aspect of finance. However, once prices went down, it couldn’t be clearer that no one could care less about virtues, so long as they don’t lose money. Except, of course, MEGA-Maximalists who claim they don’t care about money – most of whom, don’t have much to start with.
My point being, that in order for Bitcoin to succeed, it MUST see higher prices - MUCH higher than today. Clearly, what is occurring in the space is telling us Bitcoin is far from ready to spread virally – as frankly, if it couldn’t succeed with the widespread failures we’re seeing in fiat currency, Precious Metals, and legacy financial markets in general, it’s clearly not ready for prime time – ESPECIALLY if what caused Bitcoin to crash was a fork of not Bitcoin, but BCash!
To that end, the big money will not even CONSIDER re-entering Bitcoin until its recent Hash Rate collapse reverses – and in a BIG way until the “Hoffman Line,” currently at about $5,700, is retaken. As for the small money, we should all be acting in our own self-interest – by preserving capital, so we can live to fight another day. I assure you, there will be “another day” for Bitcoin; however, I have no idea WHEN it will arrive; what will catalyze it; and what PRICE it will be at the time.