I wrote in March that the cryptocurrency could be looking at a bear market. At the time, Bitcoin was hovering around $40,000. As I write this, Bitcoin is under $30,000. I’m sorry.
If we are in a true bear market, there will be more pain ahead. There are many indications that we are moving in this direction.
Among these clues, perhaps, is how Bitcoin got into the conversation about the Conservative Party leadership race, with candidate Pierre Boiliver’s strong support for it. It conjures up a much-told story about a stranger whose sudden interest in a particular investment area seems to spell doom.
Perhaps Mr. Poilievre is a shoe shiner.
This potentially true tale of a young blue-collar worker includes investor Joe Kennedy, father of former US President John F. Kennedy. Mr. Kennedy Sr. said he felt the stock market crash of 1929 and the ensuing Great Depression because, one day, a boy who had shone in his shoes started giving him investment advice.
Personally, I would never trust a man who doesn’t shine his shoes, but Mr. Kennedy’s tale has survived as one of those great investment ideas.
There is a similar scene in the movie The Big Shortbased on a non-fiction book of the same name. Investor-style personality Steve Eisman confirms his guilt over the bursting housing bubble after a stripper tells him she owns six massive mortgages.
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Which brings us to Mr. Poilievre. He’s an educated man and a financial critic of his party, and he obviously knows what he’s talking about. But that was never in question, and it’s not about that.
The moral of the shoe-shining boy story is not about the specific kid and whether he has any business giving stock advice to Mr. Kennedy. After all, we should not discount the acumen of a boy just because of his profession. The issue is the direction the boy represents.
If you’ve met a shoe shine boy who works in stocks, you probably haven’t met the only person in the entire world with that specific passion. Mr. Kennedy’s conclusion from this interaction was that many people not normally interested in the stock market did.
This is what Bitcoin support for Mr. Poilievre indicates. He is not alone among the political class that has embraced cryptocurrency in the past year. Not to mention the waves of celebrities, corporations and individual investors. Boys shoe polish galore.
To be sure, a rush of outside interest usually bodes well. Hence the cryptocurrency boom of the past year. Hence the Roaring Twenties at the time of Mr. Kennedy’s shoe polish. It’s just that, at some point, as with all market cycles, the party has to be over. Mr. Kennedy’s experience was just a reminder of that, albeit a paradoxical one that prompted him to sell everything.
While the shoe-shine theory isn’t particularly scientific, it stood the test of Fortune magazine in 1996, when reporters asked random people in New York for stock tips. Reporters informally concluded that “the market has a way to go before everyone gets a tip” – and the crash didn’t happen for another four years.
Now, though, this anecdote comes from a crypto journalist, about last year’s experience. He’s getting his hair cut, and the barber is talking loudly about his bitcoin earnings. The journalist asks what news sources the barber reads. The barber says he doesn’t read anything, but rather watches a YouTube channel by “BitBoy”.
Then there’s former US President Bill Clinton giving a crypto speech in April. Mr. Clinton also gave a talk about cryptocurrencies in 2018, after the previous bitcoin boom. Both times, he was talking when the prices went over summit.
This is the context in which Bitcoin support for Mr. Poilievre can be presented. Politicians often have only one reason to speak on any topic. Like Mr. Clinton, Mr. Poliver felt that people outside crypto circles were increasingly interested in the topic – and that by sharing their enthusiasm, those people would love it.
This might be a smart call. But in terms of market movements, the enthusiasm of those who don’t traditionally participate is always a slightly lagging indicator. At some point, an increase in public interest in cryptocurrencies will be a sign that it is time to pack them up and go home.
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