In the last few weeks, Bitcoin and cryptocurrencies in general have seen a steep increase in valuation, that of course has created alot of expectation and interest on how this will continue, but I think this story has been told before.
Based on the valuation trend of Bitcoin from coinmarket (figure below) is clearly seen that a similar steep period of increased valuation takes place a few years ago, at the end of 2013; reaching a market cap peak of 20 Billion dollars. Right now the market cap is about the double of that time and the steep of the curve is about the time it peaked in 2013.
In both cases the reasons for those peaks in valuation have been related to speculation in a market environment in which more traditional investments are not paying off enough and exists an excess of liquidity that is making investors to look for riskier and more profitable investments, and cryptocurrencies is one of them. But commodities are starting to show signs of price recovery, and stocks have been in a relatively long term increase that could be boosted by commodities rise, making more capital to move to these reducing market liquidity for other assets.
My bet based on that is that we are very close to reach the speculative peak for Bitcoin and that by the end of the first semester or very early in the next one a less steep decline in valuation will start for a relatively long time, as happened in 2014. How much value will be lost? That will depends on the behavior of more traditional options like commodities, stocks, bonds, etc.
But the truth is that this high valuation of Bitcoin and cryptocurrencies would not last long and we should prepare for the next long decline.
