I read an article from CCN today about how Anthony Pompliano has revised his predictions from a $50k BTC EOY to now predicting a multi-year bear market.
“Parabolic increases in price continue to take longer — each parabolic run is measured from the last all-time high to the new all-time high. The first rapid price appreciation took just over 300 days (2010-2011) and the second took over 900 days (2011-2013). The last parabolic price increase peaked at ~$20,000 (2013-2017) and took almost 1,500 days to complete.”
The numbers above make sense. But there’s more to this story than numbers. Why was the 2014 bull run so massive and the following bear market so devastating, and why do I think now is an entirely different case? There are some other major differences between now and then:
- 2014 had no viable altcoins. We have many platforms doing legitimate work today. XLM and ETH are very notable crypto platforms used by actual companies.
- Mt. Gox. It had an effective monopoly as the defacto BTC-Fiat gateway. There are many more exchange options available today.
- Modern exchanges are much more robust in terms of security, features, and ease of use.
- ETFs and Bakkt
Compare the above to the single point of failure that the BTC market had back in the previous bubble pops. It’s obvious that the fundamentals surrounding crypto are very, very different than they were back then. It will be harder for any single event to make or break the price and market.
One of our weaknesses as humans is overly-sensitive pattern recognition. It’s also a major strength, but does often lead us to see things which aren’t there. Such as a 2 year bear market. Consider this excellent example plucked from Nassim Taleb: What’s worse for us, mistaking a bear for a rock, or a rock for a bear? That’s why our pattern recognition is always turned up to 11. In one scenario, you’re scared of a rock. In the other, you’re mauled and someone else’s dinner. When these numbers play out so nicely, we tend to extrapolate the pattern for no reason other than that it’s a continuation of the past. In short, be careful with only relying on numbers. That goes just as much for me as it does for Pomp.
As I stated in my previous article, nobody knows when or for how long the current trend will last, or how high the next bull run will take us. Obviously Pompliano’s operating with rough numbers, but I believe he’s far off the truth. Based on my above points, I believe the crypto market will return to a steady uptrend much sooner. Also, will it take us 5 years to reach a new ATH? I could see that being the case, but with the amount of development happening in the crypto sphere, I surely don’t see us continuing our bear trend for another 15-18 months.
Regardless of our path, I’ll continue to keep an eye out for gems and add to the crypto portfolio when it makes sense.
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