“Bear markets are the best time to stay alive and in the sector. It’s frustrating for those who don’t know what to do, great for those with a long-term view.” Simon Dixon
The difference between bitcoin and everything else is that the price of bitcoin doesn’t matter. In the long run, the price of bitcoin has gone up, yes, but what really matters is the presentation of the value of bitcoin as really hard, unconquerable and decentralized money. Not the noise of the prices and not the pump. This is why traders and speculators have lost interest in Bitcoin, and continue to flock to the latest Decentralized Funding (DeFi) or Non-Foldable Token (NFT) project. The loss of interest by speculators is seen by many as a negative development for Bitcoin, but it is actually a very positive development. What we see now represented by the decline in the price of Bitcoin is its actual functional benefit value and the absence of retail speculative capital that was present before. This article will describe why this is a good thing.
Since its inception, Bitcoin has been described by misleading analysts as a Ponzi scheme based on the persistence of artificial speculation in space. As anyone with experience can tell you, speculators are inherently stalkers for shiny things and get out of any situation as soon as something more shiny appears. Well, the Bitcoin “bear market” has arrived and the speculators are gone. They got bored and took their toys home with them. Even with their disappearance, the value of bitcoin is still well above its 2020 and 2021 lows and its dependence is growing at the institutional (and sovereign) level. This adoption represents real value.
The stock market sugar rush caused by Fed money printing and negative real interest rates is ending, and the roller coaster is now down from the top. This had an impact not only on Bitcoin, but the stock market and other currencies as well. Simply put, everything is deteriorating and after the chaos subsides we will see what assets, stocks and projects offer tangible and objective value. This is what investing was always supposed to be. Despite the confusing dichotomy between “growth stocks” and “value stocks,” investing by definition is supposed to be about your long-term belief in the value For something, not in the short-term growth expectations. Retail investors have struggled to understand this due to the get-rich-quick and genius market culture of the past few years. In fact, if an asset like bitcoin is not consistently valued on a two- or three-digit basis, it is a “failed” asset for these people. The market is on top. As a result, the meme stock crowd is now out of bitcoin, just as if they were out of the stock market as a whole. Turns out, memory members have had paper hands the whole time.
This article from Bloomberg, titled “Day Trader Army Loses All Its Money in the Meme-Stock Era,” details how many new traders entering the space “haven’t seen a market that wasn’t backed by the Fed.” Retailers lost all gains in Dogecoin, AMC and GameStop rallies, and are completely back to square one.
The entire market is going down now and we need to rethink what a “good investment” is. Like the chart above from Morgan Stanley, total retail trade movements have been called off to zero since January 2020 despite huge gains temporarily in 2021. If we compare the price of bitcoin today to that of January 2020, we still see a gain of 331% relative to bitcoin, Outperforming the return of the Standard & Poor’s 500 by a large margin and outperforming the total retail profits that are absolutely nothing by an infinite margin. Do we need more evidence that HODLing is an excellent strategy?
Source: Coindesk. January 1, 2020, BTC price: $7,175.50. May 9, 2022, BTC price: $30943
Yes, Bitcoin is down from an all-time high by half, but considering the massive distortions in the market caused by unprecedented money printing and post-COVID-19 data and interest rate manipulation since early 2020, Bitcoin still outperforms anything. else. . We just need to zoom out to a more “honest” market window in order to see this. Everyone is acting like the sky is falling, but then again, that’s only because most retail investors only entered the market in 2020 or 2021 and didn’t see a market that the Fed wouldn’t support.
There is a culture in the Bitcoin community these days of “low time preference (i.e. long term)”, which basically resists Ponzi-minded speculators who need quick wins all the time. The high (short-term) time preference fuels the perpetual “passive income” lie that newbies always fall into. In contrast, the “modest” two-year gain of 331% in bitcoin is more than enough for HODLers who have been buying since before the feeding frenzy of the past two years. Long-term time preference works with Bitcoin because its proposed base value has remained true since its inception, and will remain true in the future for those who wait. Those who can’t wait to get washed out by the market over a long enough period of time in any market, just as we’ve seen with a 0% net profit for novice retail traders who pull in and out a lot. The gains from the hype, stimulus, and cultural frenzy were ephemeral, but the gains in Bitcoin’s usefulness and adoption were real all along.
Critics have been criticizing Bitcoin for needing meme speculators to make it work, but now that the meme stock speculators are gone, detractors are slamming Bitcoin for not having speculators there. This is simply illogical, proving that Bitcoin is not actually a Ponzi scheme. The same cannot be said for other cryptocurrencies. Ponzi schemes by definition cannot exist for decades, and the honesty in the current bitcoin price attests to the sincerity of its underlying value proposition. Yes, it drops sometimes. This is an indicator of health and transparency. Something that rises and rises forever? This is a Ponzi scheme and the bottom will always fall off eventually.
No one sings “Pump It Up” anymore, and while the 2021 Rally has been hilarious and fun for a while, the space really does get better without the members around. It’s time for a more mature culture of development and adoption around Bitcoin, as well as time for a more sophisticated price conversation.
This is a guest post by Nico Cooper. The opinions expressed are their own and do not necessarily reflect the opinions of BTC Inc. or Bitcoin Magazine.