Bitcoin May Rise Another 20-fold, But First….

  • SumoMe

First off, for the record I am an “Old Dog” and Bitcoin is a “New Trick”. That creates a problem right there.  The truth is also that can’t honestly say that I fully understand what Bitcoin actually is or how it actually works (which technically means I am in pretty good company with a lot of people who are actually trading it, but I digress).  And as a “grizzled veteran” (of the markets) there is a part of me that instinctively wants to dismissively shout “bubble” and sneeringly walk away.  It’s not like it hasn’t been seen before – tulip bulbs, the Nifty 50, silver, technology/ stocks, interest only mortgages and so on.

Most of you know the drill:

*Some form of “investment” catches lightning in a bottle

*The investment world (for lack of a more professional phrase) “wet’s itself”

*Price soars beyond all rational levels

You know, sort of like what you see in Figure 1…

BitcoinFigure 1 – Bitcoin price (

…And then it all ultimately plummets painfully to earth.

Well, at least temporarily. I mean sure tulip bubbles never ascended the heights again, but a lot of the Nifty 50 went on to still be major companies even after their stock cratered.  The same for a lot of the major era companies.  Silver is still trading as a serious commodity and real estate seems to have rebounded.

In sum: Is Bitcoin forming a price “bubble”? It’s hard to look at Figure 1 and not think so.  Of course, even if it is the questions no one can answer for sure are “When” and “from what level”?

The other question is “if it is a bubble and the bubble bursts, will crypto currencies go the way of tulip bulbs (as an investment) or is there a future for them in the long run?”

A Recent Bubble History Lesson

In the late 90’s into 2000 a bubble formed in tech stocks. And the bubble burst and it was ugly. And many “hot” companies folded and vanished. But not all of them and certainly not the major players.  And certainly not the industry as a whole.  Like I said before I don’t truly understand Bitcoin and crypto currencies. So I can’t say for sure if they are a “craze” – like tulip bulbs in the 1600’s during “Tulipmania” or something more viable and sustainable – like technology stocks.  To understand why this distinction matters, consider the stocks listed in Figure 2.aFigure 2 – bubble stocks that survived and thrived

As you can see in Figure 2 through 7 each of these stocks experienced a “bubble” and a “crash”.  Interestingly, the companies themselves ultimately rebounded and thrived.

The average “crash” was -87% and the average post-crash advance (so far) is about 16,000%.aaplFigure 3 – Apple (Courtesy AIQ TradingExpert)

amznFigure 4 – Amazon (Courtesy AIQ TradingExpert)

msftFigure 5 – Microsoft (Courtesy AIQ TradingExpert)

nvdaFigure 6 – Nvidia (Courtesy AIQ TradingExpert)

pclnFigure 7 – Priceline (Courtesy AIQ TradingExpert)


The only thing we can say for sure is that some people will make a great deal of money from Bitcoin/crypto currencies and others will likely get wiped out.  The danger is obvious: whenever you have a lot of investors “chasing” something – especially something that many of them don’t even understand – it is a recipe for trouble.

That being said, in my (market addled) mind the real “long-term” question is, will crypto currencies still be “a thing” after the bottom falls out?  If Bitcoin is a bubble, then if history is a guide we can look or a decline in price somewhere in the 80% to 99% range after the top is ultimately made.

From there, if history is also a guide then depending on whether or not crypto currencies prove to be a viable thing, we can expect them to either:

a) Vanish altogether


b) Rise 15-20 fold from the bottom

So here is my Bitcoin/crypto currency investing guide:

*It is OK to pile in and buy Bitcoin in hopes of getting rich (as long as you do not “bet the ranch”, invest only a small portion of your capital and acknowledge that a 100% loss is absolutely a possibility and that you are willing and able to accept that risk).

*It is also OK to sneer and shout “bubble” and not invest.  But if and when the bottom drops out and prices crater remember to peruse the wreckage.  There just might be an opportunity there (remember, Priceline lost -99% when the bubble burst, then gained 32,000%).

In any event, hold on tight people, this is NOT going to be a smooth ride.

Jay Kaeppel

Disclaimer:  The data presented herein were obtained from various third-party sources.  While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.

4 thoughts on “Bitcoin May Rise Another 20-fold, But First….

  1. Great post. I was hoping you’d address Bitcoin/cryptos. Like you, I’m still not sure what to think. There does seem to be a place for them, and block-chain technology has a lot of potential. I think the biggest dangers are

    (1) Coordinated attack (regulations) by a group of governments who want to defend their fiat currencies and fear they can’t collect taxes on cryptos

    (2) Bitcoin apparently doesn’t scale well at this point and isn’t really practical for a lot of small transactions. So it can’t replace credit cards or Paypal. Some other coins are more promising, but how do you pick the long-term winners? A diversified portfolio in the most promising ones seems like the best approach. I still haven’t dipped my toes in this market yet, though.

    1. At some point there is going to be a general market correction and the Bitcoin/cryptos will most likely get hit fairly hard. Shifting over the wreckage and creating a diversified portfolio might be the best approach at this juncture.
      Until this happens, I’m going to spend some time figuring out what this new ‘thing’ is all about!

  2. I think “big B” Bitcoin (the currency) is a lot like Netscape back in the day. Netscape was an early demonstration of open standard web browsing technology. The stock went bonkers for a while, and then Microsoft, Google, and others extended browser and web technologies.

    Other companies added web products and services, and eventually Netscape was bought out.

    I think “little b” bitcoin (the blockchain/crypto technologies) are a lot like the early internet. Interesting and potentially useful, but no one yet is quite sure how it all works, what its potential (and limitations) are.

    My guess is that small startups will spring up offering new services and capabilities that are based on blockchain technology.

    The currency known as Bitcoin may or may not be a part of that future ecosystem.

    1. “My guess is that small startups will spring up offering new services and capabilities that are based on blockchain technology…The currency known as Bitcoin may or may not be a part of that future ecosystem.”

      Right now, you have to buy Bitcoin first to buy any other alt-coins. So it’s kind of the first-mover “reserve” cryptocurrency–like the U.S. Dollar is to other fiat currencies. I don’t know if this will continue long-term, but it could. Some say it may be more of a store of value in the future–kind of a digital gold. Interesting stuff, whatever happens down the road.

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