Calm Cool & Collected. . . Because the Analytics Say So!
by David Shannon
In light of the recent panic regarding Bitcoin’s performance, let’s start with the basics to better understand what’s really going on. I find uncovering the facts by looking at the analytics can be a cooling & have a stabilizing effect.
Each cryptocurrency is a piece of a wider investment. Bitcoin has a certain amount of coins. If you add that up that will give you the market cap.
Historically, from a network growth perspective, Bitcoin is the highest performing asset class of all time. Looking at its curve of adoption on a logarithmic chart you’ll notice Bitcoin adoptions comes in waves. That in itself creates emotional cycles every couple of years. These cycles of parabolic growth are effectively super cycles. We saw these cycles in 2011 & 2017. This gives us confidence to be able to assess where we are today. However, you must leave a space at any point, for it can pop a new super-exponential cycle. At any time.
As Bitcoin becomes more adopted, the fear of it failing is less of a concern now. Zooming out to notice traditional elite legacy investors now getting in the game gives emotional confidence. These players don’t consider moving on an asset class until it has a trillion dollar market cap. Now that Bitcoin has their past that mark, we’re seeing more major hitters participate. That speaks to the projected stability of Bitcoin and the propensity for it having a long run.
When markets drop, typically the emotions get the best of people. Fear kicks in and people start to second-guess themselves and get antsy. We all must recognize that we don’t know all the answers however we can be intelligent and look at the analytics and then make the best moves based on performance.
We’ve learned that savvy investors win when they watch how the market plays out and they “buy the dip”. Typically, that’s when those who are freaking out sell. Buying the dip is a strategy that has served the minority extremely well for the majority of the time. We are in a cycle that is repeating from 2017. So we have some clues and success leaves clues! By watching previous cycles we can sort of anticipate what the probable next move will be of the market.
Bitcoin doesn’t perform logically. Bitcoin’s value is a function of the growth of the network. As more people come into the network and adopt use of the coin the price of the coin increases. This rate of growth of adoption creates these emotional cycles that impact the performance of the coin, as seen in previous cycles. Remember that there’s only a limited amount of the coin so these factors are significant.
At this moment, in Bitcoin’s performance structure, we are witnessing a sub cycle that is a part of a super cycle that naturally occurs. We are still on an upswing if you compare Bitcoins current performance to that mirrored in the 2017 cycle. There were very similar achievements of growth during that cycle. So we can estimate potential performance to come based on the historical record. Just follow the clues and keep a space for institutional influences that weren’t in play before.
Institutional investors see this dip as an opportunity to get cheap digital real estate to sit on for an exceptional profit in the future. They know Blockchain is core to the future and Bitcoin is right there with it. The value will increase exponentially. Some experts expect this assets price to climb to as much as $277 per coin within 2 years.
Let’s consider that at this point, Bitcoin has a level of adoption at about 30%. Waves of adoption have a dollar price associated with it and it runs through the financial market cycle. The “Wall Street Chest Sheet” speaks to the psychology of the market. Here’s another clue. “Sell the greed & buy the fear”.
The writing is on the wall!