Bitcoin no longer a contrarian investment [February, 2018]

Early Bitcoin investors got used to the common sense that cryptocurrencies were an alternative to the mainstream financial system.

True that Satoshi’s original vision, where each user could mine a bit of BTC per day as a reward for keeping their full node running, may have seemed like a revolutionary alternative to the mainstream financial system.

In fact it would have been absolutely groundbreaking, had GPUs and ASICs not dominated the cryptocurrency mining landscape.

If CPU mining using full node clients were still viable, Bitcoin would have remained a fully decentralized P2P financial system with absolutely no one in control – a bit like the financial equivalent of Bit Torrent. Or, as some have called it : the Internet of money.

Unfortunately it didn’t play out that way.

Today, there’s large concentration of Bitcoin and mining power in the hands of a few crypto billionaires and mining pools.

So much so, the mining function in Bitcoin Core has been disabled by default. There is simply no sense in wasting CPU cycles when ASICs tear through all the hash rate.

Bitcoin : No Longer Contrarian

Until 2017, Bitcoin was largely seen as a contrarian investment compared to the mainstream stock markets. It would go higher when Wall Street went lower and vice-versa. Bitcoin had become the alternative VIX!

But things changed radically once Wall St. banks got into the cryptocurrency game.

Yesterday, the Dow Jones had the largest one day points drop ever. This is understandable, since the main indexes are at their all time highs. It’s worth noting that it was not the biggest percentage drop, that one happened during the 2008 subprime crisis. Experienced crypto traders expected the money to flow back into Bitcoin, but it didn’t. Bitcoin continued to lose U$ value even though Wall Street was going down.

What happened?

It may be a case of scared money flowing into more conservative investments, waiting the storm out.

Or, it could be the fear of a Tether-driven implosion, since the biggest “USD” trading volumes are still being computed from USDT (which, by itself, is absurd).

Or … it could mean that Bitcoin finally went mainstream.

Bankers could be trying to sweep Bitcoin under the rug, in order to hide their own magic money, or they may have played the Bitcoin crowd, pumping BTC up until December, then when the masses joined the train, they dumped just to show their power.

Bitcoin Gone Mainstream

It could be that any of these hypothesis are true, but the only thing we can be sure of now is Bitcoin is no longer an alternative investment .

Wall Street is directly influencing Bitcoin and the king of cryptos is no longer a contrarian investment.

Crypto investors should wise up to this fact and stop treating Bitcoin as an alternative asset. Banks are all in on the Bitcoin price manipulation, for good or for bad, whatever is going on with Bitcoin prices is unprecedented, both on the way up and on the way down. There have been a number of such corrections in Bitcoin price throughout the years, but none had the magnitude of this latest one. Bitcoin dropped from U$ 20k to U$ 6k in a little over 40 days.

Bitcoin investors are feeling the pain of fake Quantitative-Easing-printed money in their own markets. Fake QE money is like a tornado and does damage wherever it passes. Large banks have unlimited funds to manipulate whatever markets they please. QE money can be used just as much to dump the Russian stock markets as it could pump the Brazilian stock markets (which they did in recent months) – it all depends on the politics. Bitcoin was on the opposition side of politics recently and banks decided to use their fake Euros and Dollars to show Bitcoin their destructive power. And they did.

Caveat Emptor

Keep one thing in mind: Bitcoin is being manipulated by the same magic money being used to manipulate worldwide stock markets.

Cryptos are no longer alternative, they are now vulnerable to the same tactics all other assets are.

Banks are turning to crypto for inflation hedge. Don’t fool yourself thinking Bitcoin is still alternative just because a bank CEO said so – they’re most likely accumulating Bitcoin as we speak.

BTC is as mainstream as options and other high volatility investments. Big banks are all over BTC, with their loads of nearly free cash printed by the Fed.

Links

Momentum and contrarian effects on the cryptocurrency market

Contrarian View: Why Bitcoin Price May Dump After 2020 Halving

Peter Thiel Is Long on Bitcoin, a “Deeply Contrarian” Investment

Is it time to take the contrarian view on cryptocurrencies? [FT Paywall]

Experts Say the Fed’s QE Program Will Strengthen Bitcoin – One Way or Another

The Crash, Unlimited QE, Gold And Bitcoin

A Foolish Take: A Contrarian View of Bitcoin

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