bItCoIN iS a StORe oF vAlUe!
As noted in my prior article, Bitcoin has an intrinsic value of exactly zero. Having no utility as currency and only functioning as a highly efficient digital chain letter, an “investment” in Bitcoin is doomed to fail. Unfortunately for Bitcoin Maximalists, recent price action in Bitcoin suggests that Bitcoin is highly correlated to the bubbly tech, SPAC, and innovation stocks. Bitcoin has fallen nearly 50% from its 52 week high set early last year. Clearly something this volatile can’t practically serve as a currency, and is nonetheless futile as an investment. To call Bitcoin “digital gold” does a disservice to gold, which unlike Bitcoin and meme stonks, remains flat on the year so far, while Bitcoin is actively imploding. Recently, Russian regulators have proposed a ban on crypto mining and use in a clear attempt to protect their economy and citizens from a volatile digital token that offers no clear benefits to society. This combined with hawkish posturing by the Fed has provided a strong headwind for Bitcoin prices. This action proves that Bitcoin is not some uncorrelated, store of value, outside of the financial system, as its price is highly correlated to the most overvalued corners of the market.
Many Bitcoin maximalists and hodlers are claiming to be “long-term investors” in response to Bitcoin’s recent decline. Unfortunately you can’t have your cake and eat it too. As previously discussed, the vast majority of Bitcoin holders own the token not out of sincere belief in Austrian economics, or libertarianism, but to get rich quick. This inevitably unravels. The claim that the vast majority of Bitcoin holders have “diamond hands” makes no sense. If the price is going down someone is selling, whether it be margin calls, or organic selling, it is clear the demand for Bitcoin and these alternative speculative, momentum driven trades will evaporate as the momentum reverses. The rotation from growth to value stocks incapsulates this trend well and is reminiscent of the Dot Com Bubble in the late 1990s. The risk is that unrealized gains become realized losses. At the end of every greater fool, pyramid scheme, the vast majority of investors are left holding the bag. It’s time for investors to finally take out the trash and dump Bitcoin for good.
Because the only opportunity in Bitcoin is the opportunity to sell to a greater fool, we are seeing lots of selling, as the market inevitably dumps hype and hopium and rotates to reality.
Disclaimer: the author Kevin Habek is not a registered financial advisor. This article constitutes the opinion of the author and should not be misconstrued as financial or investment advice. Cryptocurrency speculation is highly risky and investors employing these investment strategies run the risk of losing all or more than their original invested principal. The author recommends readers perform their own research and due diligence and consult with a qualified investment professional before entering into any investments. The article in reference: “bItCoIN iS a StORe oF vAlUe!” by Kevin Habek, is designed for entertainment and informational purposes only. The author holds no position in any of the mentioned securities and does not intend to enter into any positions in these securities within the next 72 hours.