Four weeks ago, a solicitor bailed me up at lunch.
Our friend here has been sending me your Moowsletters, why are you so negative on Bitcoin?
Because it’s a massive bubble.
Is that your only reason?
No. It doesn’t produce anything, it has no cashflow and therefore no intrinsic value.
He smirked before he continued.
Would you consider it a store of value or an inflation hedge?
No. I think it’s a very poor store of value because it’s so volatile. Gold has a lot more integrity. Worst of all, of the two thousand or so crypto currencies that exist, I reckon most of them will be dead and buried within a few years.
Ouch! He didn’t like the sound of that, so he pushed back…
I’ll send you some podcasts by a ‘thought-leader’ I’m currently listening to, he’ll change your mind. He reckons Ethereum (another crypto) will be bigger than Bitcoin.
At the time of our lunch, Bitcoin was trading around $60,000 and Ethereum was just above $4,000.
Now it was my turn…
I presume you own Bitcoin?
Of course! Who doesn’t?
Crypto currencies are going to change everything. Cash is trash! He bellowed.
By now my intuition was screaming ‘new-comer’, so I decided to probe.
(BTW…he thinks I’ll be a late-comer to crypto)
How long have you been in Bitcoin?
About three months.
And how’d you get started?
Haha! I was at the pub one night with a friend who’s a BIG Bitcoin trader. Anyway, he downloaded an app onto my phone, and I started trading within five minutes. So easy.
You make it sound like a video game. I said.
Haha! It’s better than that. Bitcoin has gone from around $20,000 to a recent high of $65,000. I’m crushing it!
Have you taken any money off the table? I asked
No way! You wait until you listen to these podcasts, this bloke (‘thought leader’) reckons Bitcoin will be at $100k before Christmas.
By now, the suited-up solicitor had a real swagger in his voice and was totally convinced he’d be a Bitcoin squllionaire and retired by age fifty.
But for now, he wanted to know why I thought Bitcoin and all the other cryptos looked like bubble bath.
So I grabbed a serviette and pulled a purple pen out of my pocket and drew two lines.
The first line had a gentle incline, and the second line had a steep incline.
Each line represented two different hills.
Which hill do you think would be least sustainable if you tried to run it? I asked.
The moderate hill (A) or the steep hill (B)?
He rolled his eyes and said, obviously hill B.
And that’s my point.
Hill B represents Bitcoin and all the cryptos.
You see, Bitcoin is up nearly 900% for the year, it has a very steep incline, almost vertical. The momentum that has driven it up is not sustainable. It will eventually run out of gas.
The solicitor laughed.
Are you serious? Is that your only explanation for a bubble? Two lines on a serviette.
You must be joking!
He took a photo of the serviette and I assume, shared it with his Bitcoin buddies.
Since that lunch, Bitcoin has dropped 51% in four weeks.
It’s gone from $60,000 to a low of $29,700 on Wednesday night.
Yes, it’s recovered a bit, but it won’t last. It’s just a ‘dead cat bounce’.
I expect Bitcoin will be at $20,000 by the end of the year and soon after that, most of the cryptos will die of natural death. Gone!
The cryptos are not the only ‘Hill B’ in the markets right now.
The tech sector will be next, lead by Tesla.
Feel free to cross examine this Moowsletter with some friends over lunch.
Have a great weekend!
Adam
Note: the solicitor referred to in this Moowsletter allowed me to retell this story as long as it was vetted by him first and I didn’t mention any names. He and I still have very different opinions on crypto currencies despite the correction. He reckons it’s a screaming buy and I reckon it’s a sell, but that’s what makes a market. Most of all, I want to thank him for allowing me to share this story. To his credit, he didn’t redact one word.
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