Why AI is the new Bitcoin

By the end of 2021, it was impossible to walk from here to there without someone chewing my Bitcoin ears.

“Hey Suncow, I was thinking of buying some Bitcoin, whatdayareckon?”

I even saw one conservative couple in their fifties take some equity out of their home to buy $100k of Bitcoin. It was manic.

Sadly, the same people who bought into the hype around crypto also believed the RBA when they said rates wouldn’t go up until 2024.

And then just before Christmas 2021, Bitcoin hit an all-time high of US$68,000…and the market whipped itself into another frenzy convinced it would reach US$150,000 by Easter 2022!!!

So for my final Moowsletter that year, I wished everyone a ‘Merry Crypto’ and they cheered even louder!

A few months later Bitcoin was trading at US$15,000. A drop of 78%.

I’ve never been a crypto cuddler because it has no intrinsic value, no cashflow and no dividend.

But the main reason I never bought into the hype three years ago was because the market was so euphoric.

Every market is bipolar.

Meaning, mania will always be equilibrated by a depressive low. And vice versa.

The highs and lows are never permanent, just pervasive and persistent. #winter/summer

Three weeks ago I made a video for our clients delineating the reasons why I believe AI will be the next Bitcoin.

Put simply, for the past year the AI sector has mirrored the exact same manic behaviour as crypto in 2021.

E.g. market favourite Nvidia has gone from US$200 – $800 in twelve months.

Consequently, every AI sensitive stock has gone with it, namely the Magnificent 7 – Microsoft, Tesla, Facebook, Amazon, Apple, Netflix and Google.

And as usual, the same red flag has appeared…this time it’s different!

It’s never different.

Yes I agree AI will make exponential changes to our lives such as increased productivity, reduced inflation, more efficient allocation of resources and a heap of other good stuff.

But it’s the mania that will nosedive the sector short term.

Let me give you an example.

In 2000 when we had the dot.com boom, the belief was we were moving out of bricks and mortar into ‘clicks and mortar’.

Consequently, the market went nuts and the three market darlings – Microsoft, Apple and Amazon – took the market took to all time manic highs.

And then when the dot.com bubble popped, the market darlings turned into ugly ducklings.

Microsoft dropped 67%, Apple fell 82% and Amazon crashed 96%. (Amazon went from $104 to $5 in a few months).

Incidentally, the NASDAQ dropped 78%…the exact same distance Bitcoin fell two years ago.

Assets do not drive markets. Confidence does.

And when confidence becomes manic and irrational it can push asset prices to stratospheric highs.

Equally, the lack of it can push prices to depressive lows.

When Bitcoin was making moon shots in 2021, the market believed it would never fall because…there were a finite number of coins, ‘cash is trash’, and the tax office couldn’t touch it.

And then it fell out of the sky before making its recent recovery.

In the last four months Bitcoin has gone from US$30k to a recent high of US$62k. The problem is it’s manic again and most likely won’t last.

This AI rally is about to experience the same thing.

The mania will finish in a depressive low before it recovers into something more sustainable.

Have a great weekend!

Adam

Back paddock – leaders who are data driven struggle in a crisis because the data is constantly changing – Forbes Magazine