Will 2018 Be the Year of the Bitcoin Crash?

2017 has been an incredible year for bitcoin.

Just take a look at its performance in US dollars:

BTC performance in US dollars 16-1-2017


Source: Coindesk
[Click to enlarge]

With any asset that’s risen so far, so quickly, you have to wonder if a correction is on the horizon — if not an outright crash.

There are certainly plenty in the media calling for exactly that. CNBC Market Insider wrote yesterday that ‘Bitcoin may now be the biggest financial bubble of all time’. The Atlantic asked last Saturday if it’s ‘the most obvious bubble ever’. And MarketWatch recently ran with the headline: ‘Bitcoin is ‘a bubble that is bound to burst,’ analysts warn’.

The trouble is, all of these gloomy assessments are hard to judge. Because we still don’t know exactly what bitcoin is.

You should always be cautious when anyone says ‘but it’s different this time’. That’s such a classic sign of a bubble about to burst, it’s practically a cliché.

But since there’s never been anything like bitcoin before, no one can seem to agree on what it is. Or what it should be. Making it difficult to value.

Some think of bitcoin as a currency. An alternative currency, not controlled by governments or central banks. And there are examples of it already in use as that. In countries like Venezuela, which is suffering economic collapse and instability in their own currency, bitcoin is emerging as a strong alternative.

Others argue that bitcoin is a long term store of wealth, like gold or silver. Its scarcity, with an absolute limit of 21 million bitcoin ever being possible, lends to this comparison.

Others still view it more as a technology, something that should not be compared to fiat currency prices, but to tech adoption rates, like smartphones or social media are.

With it so difficult to pin down exactly what we should be comparing bitcoin to, it’s equally difficult to guess if bitcoin is overvalued or due for a correction. If bitcoin truly does become a commonly used currency, an alternative on par with national currencies, then it could have much farther to rise.

Despite its incredible recent performance, it still isn’t held or valued highly enough to take a seat at the table with the major currencies. Bitcoin’s roughly US$100 billion ‘market cap’ puts it far behind the likes of the US dollar, the Euro or China’s renminbi.

But even if bitcoin were to take its place as a widely-accepted and used currency, it will be years in the future. And it’s likely to be a rocky ride between now and then.

Bitcoin has crashed before, several times. Each time, it recovered and headed on to new highs. But as mainstream attention increases, more people jump on board not because they’re true believers, but for fear of missing out on the massive gains they’re seeing. Those people are likely to get burned, even in a short term correction. And once burned, they’re likely to be shy in future — meaning they could hold on for the fall, but miss out on the recovery.

Bitcoin is still risky, speculative and wild. Just because the mainstream financial press has finally sat up and taken notice, doesn’t mean most of the world are ready for it yet. There’s incredible potential in the world of bitcoin and other cryptocurrencies. But it’s not a safe place for the unprepared or the ignorant.

That’s why Sam Volkering launched his entry-level crypto investing service, Secret Crypto Network. Sam helps his readers take their first steps into the world of cryptocurrency speculation. He teaches them how to avoid the scams and criminals attracted to such a new, unregulated asset class. He walks them through, step by step, everything they need to know. So that they can capture some of the incredible gains in this exciting new world.

Bitcoin may be headed for another correction in 2018. Or it could continue to defy expectations and confound the mainstream. Whatever happens, you shouldn’t be investing anything in bitcoin that you can’t afford to lose — and you shouldn’t try to navigate this world without a guide. Learn more about Sam’s Secret Crypto Network here.

This week in Money Morning

Is bitcoin a bubble? When comparing it to any other financial asset, it seems that the answer is unavoidably ‘yes’. But Ryan thinks that’s the wrong approach. Bitcoin isn’t just a financial asset. He argues that another kind of chart makes much more sense when comparing bitcoin. And looked at that way, this year’s continued explosive price rise makes perfect sense.

That doesn’t mean bitcoin will keep rising forever. But if Ryan’s right, it will help you understand why it’s acting the way it is. And it could even help you find the next big cryptocurrency winner. Read the details here.

Almost everyone is predicting that interest rates will rise in 2018. Not just here in Australia, but across the developed world. But Ryan Dinse goes a step further. He’s predicting 2018 will see the biggest jump in interest rates since 2006. To read why, check out Tuesday’s Money Morning here.

On Wednesday Ryan took a step back to look at the global big picture. What if there was one stock that you could use to take the global economy’s temperature? Well, Ryan argues there is one. With a foot in every major economy, and a business that can’t help rising and falling as the world’s fortunes do. He believes it’s the perfect bellwether stock.

So where is it pointing? Will the bull market continue? Or is a change on the horizon? Find out in Ryan’s article, here.

Then on Thursday, Ryan shared some of the odd conversations he’s been having with friends and family about cryptocurrency. As crypto explodes onto the mainstream consciousness, everyone and their dog wants to get on board. But it’s vital to remember that this is a very risky class of assets. As excitement heats up, fear of missing out can lead many to make rash decisions.

Worse, if those rash decisions pay off, people can be tempted to go even further. But a bad investment which luckily works out is still a bad investment. And if you keep making them, you’re setting yourself up for disaster.

Click here for Ryan’s take on speculating in cryptocurrencies without losing the house.

Speaking of speculation, on Friday Ryan focussed on unlikely predictions and unexpected outcomes. Why is it that people’s view of ‘normal’ can so often blinker them to what’s really happening? Why is ‘the herd’ so frequently blindsided? And how can you use that tendency to become a better investor? Read Ryan’s take in Friday’s Money Morning, here.

Regards,

Tyler Jefferson,
Editor, Money Weekend

Publisher’s Pick: Exponential Stock Investor.Think the recent boom in cryptocurrencies was breathtaking? Wait until you see the explosion in the technology behind cryptocurrencies in 2018. According to Ryan Dinse, it’s going to send the valuation levels of a clutch of unknown stocks soaring…In fact, these stock performances could match…or even OUTPACE…the very best technology stocks born in the 1960s and 1970s…[more]

Aussie Dollar to US Dollar: 0.7669

Gold: US$1,254.35 (AU$1,635.00) per troy ounce

Silver: US$15.92 (AU$20.75) per troy ounce

Bitcoin: US$17,275.72 (AU$22,520.97)

West Texas Intermediate Crude Oil: US$57.04 per barrel (AU$74.39)

ASX 200: 5,997.00


Tyler Jefferson joined Fat Tail Investment Research in 2012. With a background in publishing, he started out as part of the team working behind the scenes with your Editors to bring you Money Morning each day.

When he joined, Tyler was Fat Tail Investment Research’s 12th employee. Today that number has grown to over 50, as more and more readers turn to Money Morning as their source for independent financial analysis and ideas.

Today as Managing Editor, Tyler still edits the articles you read each day. Along with that, he occasionally contributes to Money Morning with his own irreverent take on the most interesting news and opportunities for you.


Money Morning Australia