Detractors have been attacking Bitcoin for requiring meme-stock speculators to function, but now that the speculators have left, the doubters are blaming Bitcoin for the speculators’ absence. But here’s why the falling Bitcoin price doesn’t really matter.
The only distinction between Bitcoin and anything else is that bitcoin’s price is irrelevant. Yes, the price of bitcoin has risen over time, but what really counts is bitcoin’s value proposition as hard, non-confiscatable, and genuinely decentralized currency. Neither the price hype nor the pump. This is why traders and speculators have lost all interest in Bitcoin and are flocking at the drop of a hat to the latest inflating decentralized finance (DeFi) or non-fungible token (NFT) initiative. Many people see this decline in speculative interest as a negative trend for Bitcoin, even though it is clearly a really positive one. What we’ve been witnessing is the price of bitcoin’s genuine functioning utility and the lack of retail speculation capital that was previously prevalent. This post will explain why this is a positive thing.
Since its beginning, uninformed commentators have referred to Bitcoin as a Ponzi scheme based on ongoing artificial speculation. Anyone with experience will tell you that speculators are by default shiny-object chasers who will abandon any position the moment something shinier comes along. The bitcoin “bear market” has arrived, and all of the speculators have fled. They became bored and brought their toys home with them. Even without them, bitcoin is still worth significantly more than its 2020 and 2021 lows and is gaining institutional (and sovereign) acceptance. This adoption has genuine worth.
The stock market sugar rush induced by Federal Reserve Board money creation and negative real interest rates is coming to an end, and the roller coaster is already descending from its peak. This has had an effect not only on bitcoin, but also on the stock market and other cryptocurrencies. Simply put, everything is collapsing, and as the dust settles, we will see which assets, stocks, and initiatives genuinely provide tangible, objective value. That was always intended to be the point of investment. Despite the perplexing contrast between “growth stocks” and “value stocks,” investing is intended to be about your long-term confidence in something is value, not its short-term growth expectations. Because of the get-rich-quick, everyone’s-a-genius market ethos of recent years, retail investors have struggled to understand this. Indeed, if an asset, such as bitcoin, is not consistently increasing in the double or triple digits, it is considered a “failing” asset by these folks. The market has turned on its head. As a result, the meme-stock crowd has exited bitcoin, as well as the stock market as a whole. The memers, it turns out, had cardboard hands right from the beginning.
Bloomberg’s “Day Trader Army Loses All The Money It Made In Meme-Stock Era” story describes how many novice traders have “never seen a market that wasn’t supported by the Fed.” Retail traders have squandered all of their profits from the Dogecoin, AMC, and GameStop surges and are back to square one.
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The whole market is currently sinking, and we must reconsider what constitutes a “good investment.” According to the Morgan Stanley chart above, despite briefly oversized profits in 2021, the aggregate movements of retail trading have wiped out to zero since January 2020. When we compare today’s bitcoin price to the January 2020 pricing, we still observe a 331 percent gain for bitcoin, outperforming the S&P 500’s return by a significant margin and defeating the overall retail trading profit of nothing by an infinite margin. Is there any further evidence that HODLing is a better strategy?
Yes, bitcoin has dropped by half from its all-time peak, but when you consider the massive market distortions induced by unparalleled money printing, memestock manipulations, and post-COVID-19 interest rates since early 2020, bitcoin still outperforms everything else. To notice this, we simply need to pan out to a more “honest” market window. Everyone is acting as if the end is nigh, but this is due to the fact that most retail investors only joined the market in 2020 or 2021 and have never seen a marketplace that was not backed by the Fed.
In the Bitcoin ecosystem these days, there is a mentality of “low (i.e., long-term) time preference,” which essentially contradicts the Ponzi scheme-minded speculators who require constant fast returns. High (short-term) time preference feeds the never-ending “passive income” myth that newcomers fall for. In comparison, bitcoin’s “modest” two-year rise of 331 percent is more than enough for HODLers who have been investing since before the recent feeding frenzy. Long-term time preference works for bitcoin since its basic value proposition has remained consistent since its beginning and will remain consistent in the future for those willing to wait. Those who cannot wait get wiped out by the market over a long enough time span in any market, as we have seen with the 0 percent net gain for beginner retail traders who draw in and out too much. The advantages produced by hype, adrenaline, and cultural lunacy were temporary, but the advances in Bitcoin utility and acceptance have indeed been genuine since the get go.
Detractors have been attacking Bitcoin for requiring meme-stock speculators to function, but now that the speculators have left, the doubters are blaming Bitcoin for the speculators’ absence. This is obviously irrational, and it demonstrates that Bitcoin is not a Ponzi scheme. Other cryptocurrencies are not in the same league. Ponzi schemes cannot endure for decades, and the present bitcoin price testifies to the truth of its basic value proposition. Yes, it does dip down from time to time. This is a sign of good health and honesty. Something that simply keeps going up and up and up? That is a Ponzi scam, and the bottom will always come out.
Nobody is chanting “Pump It Up,” and despite how exciting and euphoric the 2021 rally was for a time, the space is far better off without the memers. It is time for a more mature environment of development and acceptance around Bitcoin, as well as a more mature price discourse.