Is Bitcoin’s Latest Price Action An Echo Bubble?
- The Tide is Turning
- But still, a Long Way to Go
- What Bubble? Bitcoin is making new ATHs in Each Cycle
- There’s Real Demand for Bitcoin
As Bitcoin price gets back in the action, with Q2 of 2019 seeing a whopping 150 percent returns and becoming the best performing asset of 2019, people are back to calling it a bubble.
Right! A bubble that takes the leading cryptocurrency to a new all-time high in each of its bull cycles.
The Tide Is Turning
Mainstream media and skeptics are slowly gaining a better understanding of Bitcoin and cryptocurrency market. Their perceptions are changing and they are making an effort to understand this new class asset better.
We have come a long way, no doubt about that.
This month, we already saw Treasury Secretary and President Trump talking Bitcoin and cryptocurrencies, though not in favor of crypto as they are still in an early cycle of Bitcoin understanding, we have pro-crypto Presidential candidates like Andrew Yang in the picture as well.
With the Fed Chairman comparing Bitcoin with gold, calling it a ‘store of value,’ the tide is turning.
But Still, A Long Way To Go
However, we still have a long way to go, as evident from the Twitter post by economist and hedge fund manager, Mark Dow, who argues that the current rally is an echo bubble.
— Dow (@mark_dow) July 24, 2019
Echo bubble is a post-bubble rally that becomes another, smaller bubble. This occurs in the market in which the preceding bubble was the most prominent but the next bubble is less inflated. If this one bursts, it will leave less damage behind.
What Bubble? Bitcoin Is Making New ATHs In Each Cycle
The surge in Bitcoin price to $20,000 in its last cycle has what started people take note of the leading cryptocurrency and labeling that spike a bubble.
However, what those commentators didn’t take notice of that it wasn’t the first time Bitcoin did that and not even the highest percentage of returns either.
Bitcoin rate of return in each market cycle, in fact, has been decreasing significantly.
In 2011, BTC price saw a return of 318,864% at $31.90 high which was reduced to 58,474% return in 2014 at $1,177.19 high and then the last rally in 2017 that got it called a “bubble” saw only 11,960% return, reaching $19,764.51.
This time as well, the potential returns are projected to be just above 2,000% return, somewhere between 2020 to 2022. The new high differs drastically, with some experts calling for $50k and $100k, with others having even a higher target.
There’s Real Demand For Bitcoin
Moreover, Bitcoin fundamentals have never been stronger while demand from institutions keep on increasing.
Economist and trader Alex Kruger shares his view on if he sees Bitcoin as a bubble,
“I do not. Fundamentals come first. There's a real demand for BTC from HNWI, Family Offices, traders, libertarians, market makers, leveraged funds, and others.”
Bitcoin is currently on its way to the fourth bull cycle and bigger things are in store. With another halving coming in May 2020, supply is going to be reduced while demand is only going to grow. And this will only push price of Bitcoin higher.