Originally published on March 26, 2018 by TheMarketMogul.com.
Fundamentals? There is no quantifiable fair value. Astute technical analysis? Unnecessary in a rocket ship market. Could bitcoin still shock the world?
Under attack again, bitcoin, for the time being, has maintained the $7,400 valuation. One bitcoin, most agree, isn’t worth $20,000, $10,000 or even $1,000. The divide is whether the trading vehicle is worthless or will reach many multiples of previous all-time highs. The other unknown: what will drive bitcoin to one extreme or the other?
The Great Pot Melted and Formed a Wall
The stars aligned a decade ago. First came a devastating recession that rocked capitalism to its core. Governments intervened. For the umpteenth time in a generation, the “crowd” confidently bought the dip. Oddly, at the same time, a new star formed: bitcoin.
While years of negative real interest rates sustained equity markets, bitcoin experienced several heart-stopping surges and crashes. In 2017, cash hoards ignited a worldwide super bull market in equities and bitcoin. By mid-December, bitcoin peaked near $19,000. A month later the Dow Jones Industrial Average topped out at 26,600.
Meanwhile, in the US, eight straight years of economic growth created millions of jobs, yet wage stagnation continued its three-decade-long trend. Income disparity widened. Student loan debt and healthcare expenses compounded middle-class woes.
As the Arab Spring foundered and displaced millions, the far-right gained notoriety and prominence. Rising populism and anti-immigrant sentiment incited Brexit. America watched. Trump acted. He championed white middle-class evangelicals as victims with immigrants and Muslims cast as the culprits of America’s failures. The United States “crowd” screamed “America First.” Aghast, the great pot melted and formed a wall.
“So far as the majority of their acts are considered, crowds display a singularity inferior mentality.”
Gustave Le Bon. From the book: The Crowd-A Study of the Popular Mind.
March 2018, Trump’s administration mirrors a slaughterhouse. The President claims trade wars are great and easy to win. The “crowd” yawns. Bitcoin’s price falls to less than half of its peak valuation. The establishment ignores the radical product’s boom and bust history. They howl the next print will rightfully be zero and that the equity market’s minor losses are healthy. Buy the dip in traditional stocks they advise. New highs are inevitable.
A New Crowd Will Rise
“It is not only by his acts that an individual in a crowd differs essentially from himself. Even before he has entirely lost his independence, his ideas and feelings have undergone a transformation, and the transformation is so profound as to change a miser into a spendthrift, the sceptic into a believer, the honest man into a criminal, and the coward into a hero.”
Gustave Le Bon
As markets roll over, new dips will form. This time, only punishment is in store for those who buy the declines. Time and again bitcoin will stumble. So will stocks. Eventually, the age-old adage will come to fruition and equity markets will trade at levels that hurt the most number of people. Their savings and retirements destroyed, the current “crowd’s” distrust of everything will swell far beyond today’s suspicions. Not just individual judgements on business, government, media, employers, and family. But amongst countries and cultures. Treaties will sever. Alliances will go cold.
“Crowds are only powerful for destruction.”
Gustave Le Bon
A tipping point will be reached. Emboldened how modifications of prior notions were now accepted and the realization that models that have ruled civilizations for centuries were vulnerable, a new “crowd” will rise. From citizen to state, it will be intellectual anarchy.
“The memorable events of history are the visible effects of the invisible changes of human thought. The reason these great events are so rare is that there is nothing so stable in a race as the inherited groundwork of its thoughts.”
Gustave Le Bon
The potential of blockchain and blockchain type concepts to destroy doctrines that dominated for several hundred years cannot be underestimated. The principle “trust no one, trust everyone” is the beauty of blockchain. The instantaneous clearinghouse for all things, it can restore trust.
To the new “crowd”, bitcoin is not a stock, currency, commodity or tangible asset. It certainly is not a tulip. Bitcoin is the most valuable component of the popular psyche. Trust. And it belongs to the whole world. It belongs to no one. Attempts to crush the trust in the blockchain will only hasten the rise of the new “crowd.”
Could Bitcoin shock the world? Absolutely. Could Bitcoin trade next to nil? Change is hard, change is rare. History dictates bitcoin implodes. But don’t underestimate a “crowd” that reaches every culture and corner of the globe. If bitcoin can become the unit of value for indispensable blockchain technologies, it will trade at levels that hurt people in power. Those levels will be exponentially higher than previous all-time highs.
“Napoleon had a marvellous insight into the psychology of the masses of the country over which he reigned, but he, at times, completely misunderstood the psychology of crowds belonging to other races.”
Gustave Le Bon
Which Crowd do you Trust?
Which “crowd” do you trust? A corrupt establishment that is mired in political wars and now rattles its sabre for trade wars? Or a new order filled with charlatans promising unprecedented benefits? Blockchain is here to stay.
But what of bitcoin? If the equity markets crumble, trust in the establishment will vanish. If so, don’t be surprised if bitcoin shocks the world. Trust me.