Wed, Sep 25, 2019

Bitcoin Has Crashed--What Now?

Bitcoin (BTC) has crashed. No one really knows why but in my model we should be in for "good" news on the China trade war or some such China-related information that is strong for the Chinese currency.

This is only a theory but if it is correct, bitcoin will either rally vertically if no news breaks or the news will appear very soon. This is being written at 12 p.m. GMT September 25 and the news ought to be out there by no later than the end of the week. If I’m wrong and there is no such news and the price stays down or falls more still with no positive trade war news then my bitcoin theory, which has served so well, will be severely challenged.

In any event, bitcoin has crashed. The dreaded flag has broken to the downside and the bottom is anyone’s guess.

The decision what to do next comes back to the schism between believing BTC will be worth $100,000-plus a coin or $0 a coin. You have to pick your side.

Way back before this year’s rally, I stated there is another way of looking at this price action. In commodities a big bubble is followed by a series of smaller and smaller echoes of the initial price shock which erupt over time as the years pass. Each new price eruption is smaller than the last until the original bubble is all forgotten about. If this is your model, this BTC bubble echo is now dead and BTC will fall back to the $2,000-$3,000 range or even lower. Then after a year or two there will be another small vertical and on this pattern will go, until bitcoin is all but forgotten.

The alternate model is the tech boom, where the original bubble was replaced by another bigger rally, one we have still not seen the end of.

Is bitcoin a commodity or a value added instrument? Bitcoin isn’t like gold or copper, where a price rise creates a glut. Or is it? For me this is a very tempting model because I experienced it as a youngster and saw it play out all the while everyone continued to wish for the return of the moment when copper or gold went to the moon. However, bitcoin is not going to flood the market as miners pour resources into a race to over produce. Bitcoin protects itself from exactly the economic reason why high prices are the solution to high prices

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