Two months ago I wrote The Bitcoin “Penny Stock”, detailing what I believed were the conditions that created Bitcoin’s incredible run through September. Although the piece sounded cautious given Bitcoin’s 30-40x 1 year return up until that point, I noted that the prevailing conditions allowed far more than that, perhaps another 50-100x. I highly recommend reviewing that piece since I continue to believe those conditions remain true.
Since September, Bitcoin has more than doubled from $3.5k to nearly $11k. Bitcoin is all the rage now, even more so than before as evidenced by media, institutional, and retail attention.
Bubblish? Very likely, but this bubble will be unlike any other bubble in history for one very simple reason – Bitcoin (and crypto) are global assets, and this will be the first global bubble in history.
Consider the list of previous bubbles: US residential property, European peripheral residential property (e.g. Spain), dotcoms and telecoms in the late 90s, Japanese real estate and equities in the 80s, etc.These were massive bubbles. But despite their size, they were localized in nature. The vast majority of people buying US real estate were Americans. The vast majority of people speculating on Spanish real estate were Spaniards. The vast majority of people speculating in dotcoms were Americans. This is because the assets were localized and regulations made it hard to invest cross-border. This limited the amount of speculative capital that could flow into the assets. This is largely untrue of Bitcoin and cryptocurrencies. The amount of speculative capital that can flow into Bitcoin is larger than any other pool of capital observed in history. Bitcoin speculators are/can be from every country. With that in mind, why should we be surprised by $400 billion of crypto assets that have likely decoupled from reality? If the whole world is in on this, the hockey stick likely hasn’t even turned upwards.
In the 90s, Microsoft alone was valued at $800 billion. The combine value of dotcoms was probably greater than $10 trillion. And that was fueled largely just by American money.
There is no parallel for what is happening. Be amazed, and perhaps be greedy while you can, but be scared. This could be the first true global bubble.