Is the Crypto Bubble About to Burst and What Are You Going to Do About It?

The crypto market has been undeniably lacklustre the first half of this year. The prediction I provided last week that shows the market swinging a different direction every sixth of month did not materialise. The current bull run in the stock market is the second longest in history, going strong at a staggering 110 months long, but has gone shaky in recent months. All surface signs show that crypto is about to die. In a CNBC poll, 75% of the ultra-rich believe that the next US recession will take place within the next 2 years. Even major finance influencers such as Tony Robbins and Warren Buffet have also weighed in on the matter.

But before you start selling off all your portfolio, listen to my Rocking Rant of the Week.

Now, there’s another camp of crypto investors who believe that if stock market plummets, cryptocurrency will finally rise to be the defacto currency of choice for the people. Let us take a look at the stock market and its correlation with the crypto market and see if they are right:

Stock market works inversely proportional to crypto market in 2017. We could see a major spike whenever stocks fall. The idea is that if the crypto market becomes a safe haven for major stock investors during time of uncertainty so going by that theory alone we could see some incredible gains if the stock market starts to fall, right? Wrong.

This year, 2018, we began to see stock and crypto move almost in tandem with some small variations. In February, as both markets saw a downward trend, we saw bitcoin pick up a little, which is an anomaly for a plunge. That suggests that investors might have moved their money to bitcoin and buying it on a discount. But wait – this still sounds like good news right? Hang in there with me. I’m getting to it.

So far we haven’t seen a real catastrophe yet. People are spooked but their overall portfolio is still in the green. When it is a real bloodbath, the type that saw the fall of Lehman brothers, all bets are off. People go back to what is safe and real. When equities go down, there is a tendency for people to look for objects and commodities that have intrinsic value to protect their wealth. Something that they can touch: Metals such as gold, silver, and platinum, land, even art.

Some have called cryptocurrency or Bitcoin in particular the digital gold, because gold and bitcoin have similar properties but old folks will argue the one main difference.

You can put gold on your wife’s finger, or use it in electronics. There is a real use and purpose to gold that, coupled with its scarcity, lend it intrinsic value.

But Bitcoin?

Now, Bitcoin and crypto in general: What would happen if they went to $0? Blockchain would still be around, its value is now being realised and recongised and a useful technological framework for decentralised ledger and security. Cryptocurrencies not so much.

What are the factors that might cause a crash in the crypto market?
Just one - Fear.

Just look at that chart in the link (https://www.ccn.com/todays-stock-markets-crash-will-affect-cryptocurrency-markets/). VIX is an index of the volatility in the stock market and is also referred to as the “fear-gauge”. This means that there is a definite inverse correlation between VIX and Bitcoin. It means that as fear in markets decreases bitcoins price increase. Conversely, as fear increases bitcoins prices decrease.

You look at today’s industry when value is derived from public perception – your Instagram profiles, your Facebook posts, your popularity game, the clothes you wear. Cryptocurrency is a reflection of this era’s mindset but laced with crack. It encapsulates the good, the bad, and the ugly side of the digital culture that we know today.

It’s a fad based entirely out of your collective belief.

The market is shit today and most of this year in fact. The brief respite we have from the upward spike is quickly replaced by negative outlook. Each time more dire than the last.

In the world of crypto, hype and fear builds upon itself and combined with the recent bitcoin price fall, weak hands will end up panic selling causing a domino effect. Remember it’s all tied to perception. It seems to me that winter is coming and this might be a long one.

Next question is, when will the Big Crash arrive?

Historically, August through October have been bad months for the stock market, with the biggest financial disasters happening in October; but the real question now is, what will happen to cryptocurrency once the next global recession does take place?

Just for a moment, suspend your past experience and logic on what is possible or not. Previously I spoke about how in times of crisis bitcoin might go to zero and people will go to gold. There is a counter argument to that and one that I am rooting for.

Some experts believe that institutional investors are increasingly seeing virtual currencies as more of a viable insurance bet against a recession. Can this mean that the world’s most affluent people will take a larger bet on bitcoin once the Stock Market crash occurs?

VC arms of the Rockefeller, Vanderbilt, and Soros families have entered into the crypto market as recently as April 2018. The fact that some of the most affluent families in the entire history of the world are entering crypto, to me, is a clear sign that crypto is gaining more faith and poised to be the new world currency, much like what the Rothschild has predicted decades ago.

This line of reasoning isn’t a very strong one if you don’t believe in bitcoin to begin with. Old farts in the finance world too used to how things are done can’t seem to wrap their head around crypto just as their parents’ probably couldn’t wrap their heads around operating a VCR back in their days will find the idea the bitcoin being surviving a financial meltdown simply absurd.

As much as I like bitcoin to be the fiat killer, the truth is, the world isn’t ready for Satoshi’s vision. The crypto scene has been attacked on all sides by regulations and scams and people with no interest in a decentralised world. The demographic that will make the real change in crypto is also likely to be the demographic that we understand the least – the millennial. They don’t function and think the way we old farts do. What is nonsense to us is a cultural norm to them. On that line of reasoning, would then it not be possible that perhaps these new generation would likely be the ones to take bitcoin and crypto to new grounds that the authorities are resistant to see?

I believe that when the next big crash comes, you will see the likes of Bitcoin and other cryptocurrencies become the safe havens for affluent investors and that’s when the transference of wealth might take place.