Opinion
It’s tough to admit, but I was wrong about bitcoin
William Bennett
Money contributorIt’s time for us bitcoin sceptics to eat humble pie – we were wrong.
Bitcoin has been on a tear since Donald Trump won the US election. It has surged more than 40 per cent to flirt with the momentous $US100,000 ($153,000) milestone for the first time in its history.
In recent days, bitcoin has crept closer to the $US100,000 milestone.Credit: Jamie Brown
More than $US4 billion has flowed into US-listed bitcoin ETFs (exchange-traded funds) since the election alone. Bitcoin is the best-performing “asset” class – up more than 130 per cent this year, ahead of gold (up 32 per cent) and the US market (up 25 per cent).
Trading volume in MicroStrategy, the most popular way to gain leveraged bitcoin exposure via the stock market, last week surged to a record $US136 billion, eclipsing the previous record set by GameStop in 2021.
It’s been a perfect storm of bullish news for crypto recently, buoyed by expectations of a more crypto-friendly administration that may legislate a strategic bitcoin reserve and appoint a “crypto tsar” to the White House.
Some liken bitcoin to digital gold, and a way to hedge against a doomsday-like scenario in which the US government defaults on its debt, which is growing at $US6.3 billion a day. The fundamentals, or lack thereof, mean that the price of bitcoin is driven by nothing more than sentiment and simple supply and demand.
It’s a serious struggle for the non-believers like me, who dismissed crypto as a joke and nothing more than a Ponzi scheme best left to the likes of gamblers and criminals, but now we are watching like stunned mullets as the price increases week after week.
“Currently it is a pure momentum play – buying and higher prices begets more buying,” says Tony Sycamore, market analyst at trading platform IG Australia.
It doesn’t provide a yield, pay a dividend or have inherent physical value. It’s not accepted as a payment form in many places, but in the end, does that really matter?
Bitcoin has disrupted the world of finance in the same way Trump disrupted politics, or social media disrupted news. It’s all about the vibes, man – we oldies, we don’t get it.
Having never held bitcoin, I don’t have any seller’s remorse, but spare a thought for those who sold too early.
“I have not bought crypto, and now I feel silly,” the CEO of Charles Schwab, the largest brokerage in the US, told Bloomberg last week.
You’ll be aware that news and social media are saturated with stories about bitcoin, and people are gloating about their bitcoin profits more than ever. That includes El Salvador President Nayib Bukele, who was derided for making bitcoin his country’s legal tender in 2021; his nation’s holdings are now worth more than $US550 million. When bitcoin hit its record this month, he posted a simple but brutal “I told you so” on X.
Just last week a crypto “entrepreneur” flushed with bitcoin “gainz” bought a banana taped to a wall for $US6.2 million at a Sotheby’s auction in New York. He plans to eat it as part of a “unique artistic experience”.
It’s reminiscent of pandemic times, when digital tokens of cartoon apes sold for $US24 million and meme stock mania drove loss-making companies such as Gamestop and AMC to billion-dollar valuations.
Having never held bitcoin, I don’t have any seller’s remorse, but spare a thought for those who sold too early. With FOMO (fear of missing out) reaching excruciating levels, I’m finding myself wondering if it is too late to change teams and join the “crypto bros”, whom I once derided and now resent.
“Coming from a trading background, I have been both bullish and bearish bitcoin in the past. But right here, right now, I would prefer to be a buyer of pullbacks in bitcoin,” says Sycamore.
“Over the next week or so, I think we could see a run-up towards $US110,000 before a retracement. In the longer term a move into the $US130/150k range isn’t out of the question.”
Famed Pollyanna tech investor Cathie Wood says otherwise. She believes that bitcoin could reach up to $US1.5 million by 2030, while Jim Cramer, the man infamous for recommending buys at the top of a cycle, has told his followers to “own bitcoin, that’s a winner”, possibly the biggest alarm bell of all. Even broken clocks are right twice a day.
But predicting bitcoin’s next move is anyone’s guess. “At this point, I don’t see any evidence of divergence [a sell signal] in bitcoin,” says Sycamore, “but I would be waiting for a pullback first before buying.”
Warren Buffett once said that “bubbles form when people see the guy next door, who they know is dumber than they are, is getting rich, and they aren’t”, but right now, I’m the one feeling stupid. Who knows how long this bubble could last?
“Traders should run towards bubbles, not away from them. However, they should not lose sight of the fact that bubbles do eventually deflate,” cautions Sycamore.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions
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