Bitcoin Bull Market Considerations

It is no secret that plenty of speculators bought Bitcoin well above the current price (~$6400 at the time of writing) and are patiently waiting for Bitcoin to rally once again so they can break even and maybe turn a profit.

In this essay, I will posit three arguments as to why I believe that the next Bitcoin bull market won’t be as manic as bull market of 2017.

This is not to say that Bitcoin will never reach its all-time high. Rather the purpose of this essay is to offer a more grounded take of what one can expect from a Bitcoin bull market post-2017, and why.

First Mover Mania

Novelty in tandem with increasing price is a powerful catalyst.

Nobody had heard of Bitcoin before, nobody can explain it to you, but its price was going up rapidly. Something something digital gold, sound money, and you’re an idiot if you’re not on board.

Sound familiar?

The bear market of 2014 (when Bitcoin was at an incomparable price, and retail speculators don’t look at charts anyway) was, I would argue, a distant consideration for speculators in late 2017. Instead, Bitcoin was this new cool technology that was only known to be increasing in price.

The reality now is quite different for two main reasons.

I) Due to Bitcoin’s meteoric rise and subsequent fall, the public at large (and certainly most people who follow markets) will have now heard of Bitcoin given the incessant news coverage on the way up, as well as on the way down. I submit that a very large portion of the novelty, which was a strong catalyst for buying, has since worn off.

II) Previously, Bitcoin was only known for its increasing price. At this point, you may be understandably concerned with my fixation on the price. In response, I humbly submit that without the rapidly increasing price, Bitcoin would have enjoyed but a mere fraction of the coverage it received in 2017, if any at all. Price is an inextricably important factor when it comes to the public’s perception and the media’s coverage of Bitcoin. To return to the argument: in 2017 Bitcoin was known for its rapidly increasing price, and I would argue very few investors scrolled all the way back to 2014 for the last bear market. The present circumstances are different: 2018 has proven that Bitcoin can erase profits as quickly as it can create them, and this is something that current and future investors will be cognisant of.

The argument can be summarised thus: much of the hype about the technology is gone, and more importantly, unlike in 2017, people have now witnessed firsthand how much money they can lose by investing in Bitcoin.

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Technical Resistance and Price Discovery

Support that is broken turns to resistance.

In 2017, barring a few regular corrections, Bitcoin faced no technical resistance.

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