When you ask anyone about Bitcoin, the response, if it isn’t a blank stare, will generally be something like: “it’s the thing you buy on the internet.”
Many will highlight the fact Bitcoin turned a bunch of computer geeks into fiat-denominated multi-millionaires.
They’ll also tell you, and rightly so, that Bitcoin was the cause of significant financial pain for average Joes and plain Janes who believed in the tech succumbed to FOMO at the apex of the last bull run.
It’s been almost a year and a half since Bitcoin’s all-time high valuation and the price of the world’s foremost cryptocurrency is down roughly 75% since the late-2017 euphoria.
Regulators continue to pursue swindlers that took advantage of the average punter’s willingness to blindly invest in a blockchain-enabled ‘this’ or decentralized ‘that’.
Surely, with the sheer volume of cautionary tales that emerged from the most recent Bitcoin bubble, we’ve learnt our lesson?
As someone who works full-time in the cryptocurrency space and has experienced the ups and downs of multiple Bitcoin bubbles, I feel it’s necessary to share with you why I believe that basically no lessons have been learnt and, in fact, the chances of an even bigger FOMO-driven bitcoin bubble remain very real.
To be sure, this scenario isn’t something I desire (more on this below) but to turn a blind eye to the possibility it happens, though, would be rather stupid of me.
And so, here’s my rationale for a renewed Bitcoin bull run.
Retail demand for Bitcoin? You ain’t seen nothing yet
Without a doubt, Bitcoin was a topic of conversation at news desks, offices, and family dinner tables all over the world in late 2017.
At this time, though, the so-called ‘plumbing’ of the crypto ecosystem was scant, making purchasing cryptocurrencies a rather onerous task.
As the main on-ramp into the crypto world, exchange companies found themselves terribly under-resourced amid the Bitcoin buzz.
All-time high traffic volumes proved unbearable for even the biggest exchanges’ back-end infrastructure to cope with.
In terms of personnel, too, exchanges found themselves unable to deal with an inundation of customer applications, each of which had to be manually verified for KYC/AML purposes.
Indeed, I can recall countless stories of people being forced to wait weeks until they were allowed to buy their first cryptocurrency.
We are currently experiencing record high traffic. This is resulting in some customers having slow performance or issues logging into their https://t.co/bCG11KveHS accounts. We are actively working to resolve this as quickly as possible.
— Coinbase (@coinbase) December 7, 2017
An all-too-common problem for exchanges in December 2017.
And that’s just counting those who were patient and determined enough to buy into the asset class.
For an untold many, though, Bitcoin remained something that piqued curiosity. Nothing more.
This was particularly the case for wealthier folk who, generally speaking, tend to be older, more time-poor, and less tech-savvy than younger generations. Something to remember.
Promisingly, in the time since the latest episode of Bitcoin hysteria, retail investors’ ability to buy Bitcoin or other cryptocurrencies has become astronomically easier.
The highly competitive nature of the crypto exchange and wallet space has brought about tremendous UI/UX improvements.
What’s more, retail investors have become spoilt for choice when it comes to choosing where they’ll gain exposure to cryptocurrencies.
In a hypothetical scenario where retail demand for Bitcoin spikes dramatically, à la December 2017, I suspect the companies occupying the crypto industry will be far more able to cope than last time.
Crypto industry’s improved ability to serve HNWIs
During the last crypto market run-up, large chunks of my time were spent dealing with clients wishing to invest four-figure dollar amounts into Bitcoin and other cryptocurrencies.
That’s no longer the case. Nowadays, clients are approaching me wanting to know how to invest five- and six-figure sums.
Why the change? In my opinion, it’s largely a result of the industry’s steadily improving ability to cater to the needs of high-net-worth individuals (HNWIs), particularly with regards to custody solutions and crypto insurance products – both of which weren’t available in 2017.
Given I’ve no reason to believe my personal experience is an outlier, the fact more HNWIs have begun (and will likely continue) gaining exposure to cryptocurrencies is another factor supporting the case for another Bitcoin bull run.
Geopolitical and macroeconomic woes = Bitcoin’s boon
Ever since it was born amid the turmoil of 2008’s global financial crisis, Bitcoin has been espoused by proponents as a hedge against a systemic meltdown of the world’s political and economic landscape.
This narrative was heavily reinforced after Bitcoin’s price skyrocketed in the early stages of 2013, a time that coincided with an unprecedented bailout of Cyprus’ banks.
Fast-forward to today, and here we are navigating an uncomfortably novel global economic climate laced with countless peculiarities such as near-zero interest rates, lacklustre real wage growth, record stock buybacks, and a heroin-like addiction to quantitative easing.
Now, if you would, consider the moves being played out on the complex geopolitical stage.
In recent times, we’ve seen Iranian banks suspended from SWIFT as well as U.S. bond holdings slashed by countries such as Russia, who, simultaneously, have significantly bolstered their gold reserves.
Oh, and let’s not forget to point out the rampant, inconceivable inflation rates crippling a number of national currencies like the Venezuelan bolívar, Argentine peso, and Turkish lira.
I’d suggest watching this space. I know I will be.
Headlines showing a move away from the USD:
'Venezuela Ditches USD, Will Use Euros For International Trade'
'China & Japan Dump Treasuries As Reserves Slump To 5 Year Lows'
'Hungarian Central Bank Stuns, Announces 10x Jump In Gold Reserves'
As they say in the Pantene infomercial: pic.twitter.com/UXBm1UlZ7N
— Alex Saunders (@AlexSaundersAU) October 18, 2018
An important narrative to keep an eye on.
If you recall, earlier I wrote how another wild, frantic Bitcoin bull run isn’t something I’m hanging out for.
What has me worried? Is it knowing there’ll almost certainly be a proliferation of bad actors who successfully prey upon the gullible? Yes, but that’s not it.
My biggest reservation is regarding what I believe to be Bitcoin’s strongest property: its use as a store of value.
Should more mind-blowingly volatile market cycles ensue, do you think the narrative of “Bitcoin as a store of value” disappears? It’s a question I continue to struggle with.
Do you think my concerns are valid? If not, head across to Twitter and try talking some sense into me!
Thanks for reading!