Crypto is a bubble and here is why
Everyone around the cryptocurrencies will find any reason to tell you why their crypto is heading to the moon and how the cryptocurrency is the best solution for everything. My view is that the crypto is a bubble, but I don’t want to speculate like most of the crypto community.
The crypto community may seem like a great community of which. They can be friendly and support you in all the ups and downs. But whenever you come to them with a negative catalyst around a cryptocurrency, they will burn you to hell. They will also find whatever reason to tell you why their coin will go up and only up and (in my experience) they will never listen to the actual data. The biggest thing you’ll soon notice is that cryptocurrencies are everywhere, a great example being Super Bawl 2022 or tiktok. I can’t go through a tick without seeing at least 2 videos on 20 scrolls about the crypto and someone told why you should buy this coin or what the market will do. The funny thing is, you’ll almost always see someone between the ages of 18 and 40, which may indicate that buyers or cryptocurrency holders are mostly younger people. I really don’t like that crypto community is full of fraud. Everyone is trying to promote their 50,000 market cap coin to attract you and then rugpull you. Or that you can’t have a crypto tiktok without spam bots trying to sell you a service or something. (and it’s a scam, of course). In my opinion, the crypto community is great until you look at it from a real investment (not speculative) perspective.
2. Global Adoption
you have probably heard it many times. “Crypto will be next global currency”… Yeah…. No it wont. I wish people would think about it for a second. Because why would the goverment give up their powers to a decentralized entity? I think the only way that crypto could get adopted is with massive regulations and pretty huge centralization, apart from that i cant see a logical sense of why would any country with a solid GDP adopt BTC or any other coin to run their economy. Its a pure nonsence. Some may argue that “El Salvador adopted BTC”. What people dont talk about is that they are country with around 25$billion GDP. Which is pretty much nothing against USA with almost 20$trollion GDP. Also El salvador had a massive decline from 2019 to 2020 where they GDP went -10%. So they would even adpot a rock as their currency to save their economy. Also if you will watch news you will see articles about all the problems they are now facing with BTC being their currency. Also would you really wanna have a currency that can lose half of its value in a months like it did now? Also i wanna add on that everyone will talk about El salvador and not 40+ countries including China that banned BTC or any other coin.
3. BTC as hedge against theinflation
“BTC is like virtual gold” and “BTC is a hedge against inflation" ahhhh no. It is clearly not. BTC or any other crypto never faced a real inflation issues. BTC was introduced around the biggest housing market crash and after that there wasnt any huge inflation spike. So nobody could say BTC is or isnt a hedge, because there were not any data to back that speculation up. But now there is, just look what BTC did in 10 November 2021 when the first rapidly bad CPI data came out. It pretty much marked the top and kept falling from there. What did gold? It sustained its value, and went up ATH of 2070$ from 1821$ US$ / OZ. It even outpreformed S&P in a fall so yeah…. clearly not a hedge. So why are still people saying that BTC is a virtual gold? Because they are both store of value? Gold is used in chips and many others, Gold was used as a currency in a past, you can hold physical gold, you can also hold CFD (virtually) while what can you do with BTC and what can you make out of it? I still dont get why are people comparing two things that shouldnt be comparable in any way. BTC is more like a tech stocks. When QQQ was +2% BTC was most like up like 6%. When QQQ was down -2%. BTC was like -6%. So it acted more like a leveraged QQQ that doesnt generate any cashflow.
This might be new to you. But leverage is a real problem in BTC and pretty much all the cryptos. It could be a silent killer or as Michael Burry said… The thing that could pop the bubble and cause it to fully collapse. And i agree with it. You can google thing called BTC estimated leverage ratio that shows:
“The exchange’s open interest divided by their coins reserve which shows how much leverage is used by users on average.
Increasing in values indicates more investors are taking high leverage risk in the derivative trade.”
Why is it useful? Well… we can now look about the estimated amount of leverage there is in BTC. In the picture bellow we can we that 03 May 2022 There was a peak leverage. What does that tell us? People were so sure that BTC will go up that they started buying on leverage. It didnt and now they are slowly getting margin called. And there is such a huge leverage that margin call after margin could cause the price to fall rapidly. I also heard (could be a false information) that Microstrategy will be forced to sell (margin called) some of its positions around the 22k$ BTC. This could cause the price to fall even more and other people could get forced out of their positions. Just look what LUNA did at 11 May, it almost went to zero when people lost their belive and that caused a chain reason and rapid sell volume that forced another people to sell that helped the selling volume and so on. I wouldnt be surprised if the same would happen to BTC or any other speculative coin.
5. Growth math
I heard many many many people tell me that they expect BTC or crypto market to growth like 50% a year. Lets just do the math. If BTC with the price of $28,770 per coin and $547,725,012,369 market cap will growth not 50% but lets say 40%. Lets calculate that (in trillions). 0.547 * 1.4¹¹ = $22.15 trillions. This would mean that with the 40% yearly growth, BTC would have bigger value then the US GDP in 11 years. If i would say 15, it would be higher then all the world countries combined. Yeah…. not realistic, also this would make BTC valued at (with 40% per year in 11 years): 22015000/20 = $1100750 (counted with 22 trillion cap and 20 millions in supply). $1.1 milion dollars per one bitcoin. I just dont see this as a realistic.
6. Blockchain technology
“But it is a new disrupting technology” - I heard this many times. And i partly agree. My speculative opinion is that blockchain will have a part of the pie in the future. But do we really need to have thousands of crypto coins built upon the blockchain? Not really. We dont need to have crypto to use blockchain. People talk about how distruptive it is and they wanna put everything on blockchain… I heard many times crazy ideas about NTFs like… “What if we would have restaurant tickets as NFTs” - But why? Why would you want to have your restaurant ticket as an NFT? What’s the point, its like why would i wanna spend thousands of dollars for a picture of a monkey thats on a blockchain? Because i can get voting power and other utilities? Doesnt make sense to me. We could have blockchain like ethereum without the currency ETH, we could. We can have decentralized technology without a “disruptive” coin. We can have things like helium miners, you just won’t get a HNT token but dollar. So whats the point? “Because its on blochain” isnt an argument. I really like the technology but i really think its so missused in many ways.
BTC and pretty much crypto as a whole is one big get rich quick shceme. If you disagree just check any social meadie, any event… have a conversation with a friend. You will here how easy you can get 2x on your “investment” some people may say how you can 1000x your money in 2 days. Its so stupid. If it would be that easy everyone and noone would be rich. You need supply and demand. Crypto’s price is powered by its belif in it becoming something more and by belif that you can make big money in here. If you wouldn’t be able to gain big chunks of money, why wouldnt you invest in a stock market and stuff like that right? Whole Crypto space is built on speculative belief, and what will happen when the belif will slowly start to fall? It will lose its price rapidly.
8. Currency vs Cashflow
When you ask someone in the crypto “Where do you think BTC will be in 2025”. They will all make some random numbers. And sure.. you can’t see in the future of a market. But with stocks, you can at least calculate its cashflow and fundemental value. With BTC or any other coin you cant. Because it, you can say, has no value. I mean, sure right now it is traded around $28k per coin but that’s because people are willing to buy it for this price. BTC can’t generate you any cashflow, so it cannot be priced and predicted in any way. In the end its a supply and demand just like everything.
9. Hedge funds
Many people hate Warren Buffet for his opinion about crypto with an argument that he is too old. And im like “WTF”. He was there when market and economical crashes happened, he learned about the market since he was a child and he became a billionare thanks to his skill and you will (16 years old shiba “investor”) say that he is too old to understand? There is a reason why hedge funds dont wanna touch BTC or any other coin. Its vollatile and they (or most of them) smart enough to read the data and not to speculate. They are investors, not speculators. And if you think you can somehow beat people that are in the market for years with your coin with a picture of a dog then you are foolish… Sure some people made huge amounts of money out of it, but what about the people that lost huge amounts of money.
10. Dot com bubble
This was probably the biggest tech stock market crash in history. Why did the market crash and how is it relevant? Simple. It was driven by the same hype and scheme. Everyone was saying how cisco has its disruptive technology and how everyone will be rich when you buy their stock and…
That didnt age too well as you can see. Many people made alot of money at one point and then lost it all after when the bubble popped. Sure… internet is a big thing now but just look at how the more then 95% of all compannies didnt survive it and how they went pretty much to 0. I wouldnt be surprised if the same would happen to Crypto market.
It is true that most of crypto is decentralized, but is it really? Few days ago bunch of wales crashed the whole coin that was in top 10 crypto’s. It went to 0 even with its “stablecoin”. And yesterday the most used USDT stable coin went to $0.95. So its not that decentralized, when two big entities can crash the whole (top 10 cryptos) coin and its stablecoin. But this is not the only coin that crashed by some entity. It happens everyday, there are many coins that died thanks to 51% attack. This cant happen with your bank account. Sure, the bank can cut you off but that might hurt the bank more then yourself. And ill rather have that then some random entity completly wiping out the value of my coin.
I think blockchain technology has a potential, it can solve multiple problems but we dont need these fancy coins that “will make us rich one day with source: TRUST ME BRO”. I dont wanna speculate where the crypto market will be in the future. I hold some BTC and ETH and few other coins last year and made few bucks out of it when i was still new to this all. But with time when i was learnings about this beautiful investing world I realised how stupid the crypto market is with its speculation and pure belif in it. I can’t as any other person predict where the BTC price or any other coin price will be. BTC might have new ATH in a year, that possible, because its driven by hype. But one day the bubble will pop, same as it did in year 2000.