“Bear markets are the best time to be alive and in the industry. It’s depressing for those who don’t know what they’re doing, it’s great for those with a long-term perspective.” – Simon Dixon
The difference between bitcoin and everything else is that bitcoin price doesn’t matter. In the long run, the bitcoin price has risen, yes, but bitcoin’s value proposition as hard, impregnable and truly decentralized money really matters. Price is not hype, not pump. Because of this, traders and speculators have lost interest in Bitcoin and continue to flock instantly to the latest pumped-up decentralized finance (DeFi) or non-tradable token (NFT) project. This loss of interest from speculators is seen by many as a negative development for Bitcoin, but it is actually very positive. What we currently see represented in the low bitcoin price is the value of its real functional utility and the absence of the retail speculation capital that was there before. This article will explain why this is a good thing.
Since its inception, misguided analysts have described Bitcoin as a Ponzi scheme dependent on constant artificial speculation being pumped into space. As any experienced can tell you, speculators are bright object hunters by nature and will withdraw from any position the moment something brighter pops up. Well, the bitcoin “bear market” has come and all the speculators are gone. They got bored and took their toys home. Even though they’re gone, bitcoin is still at a much higher value than its lows in 2020 and 2021, and is driving corporate (and sovereign) adoption. This adoption represents real value.
The stock market sugar rush caused by the Federal Reserve Board’s printing money and negative real interest rates is coming to an end, and the roller coaster is now going downhill. This has had an impact not only on bitcoin, but also on the stock market and other altcoins. Simply put, things are getting worse and once the chaos subsides we will see which assets, stocks and projects offer tangible, objective value. Investing is always supposed to be about that. Despite the confusing dichotomy between “growing stocks” and “value stocks,” investing, by definition, has to be about your long-term belief. value not in short-term growth forecasts. Retail investors have a hard time understanding this because of the get-rich-quick market culture that everyone has been a genius at for the past few years. Indeed, if an asset like bitcoin is not consistently gaining double or triple digits, then it is a “failed” asset for people. It’s on the market. As a result, bitcoin is no longer in the meme-stock crowd, just as they are off the stock market as a whole. It turns out that the memes had paper hands all along.
This Bloomberg article, titled “The Day Trader Army Loses All The Money It Made During the Meme-Stock Era,” details how many of the new traders entering the space “have not seen a market unsupported by the Fed.” Retail traders have lost all their gains in the Dogecoin, AMC and GameStop rallies and are right back in square one.
The entire market is falling right now and we need to rethink what a “good investment” is. As in the chart above from Morgan Stanley, overall retail trade movements have slumped to zero since January 2020 despite temporarily large gains in 2021. If we compare today’s bitcoin price with the January 2020 price, we still see a gain of 331. For Bitcoin, the % outperformed the return of the S&P 500 by a large margin and surpassed total retail trading profits by an infinity margin that is absolutely nothing. Do we need more evidence that HODLing is a superior strategy?
Source: Coindesk. January 1, 2020, BTC price: $7,175.50. May 9, 2022, BTC price: $30,943
Yes, bitcoin has halved from its all-time high, but if we factor in the incredible market disruptions caused by the unprecedented money printing, memestock manipulations and post-COVID-19 interest rates since the start of 2020, bitcoin is still blowing everything else out of the water. . To see this, we just need to look at a more “honest” market window. Everyone is acting like the sky is falling, but again, that’s because most retail investors only entered the market in 2020 or 2021 and have never seen a market that isn’t backed by the Fed.
There is a culture of “low (i.e., long-term) time preference” in the Bitcoin community these days that is fundamentally opposed to Ponzi scheme-based speculators who always need quick gains. The preference for high (short-term) time fuels the constant “passive income” lie that newbies always fall for. By contrast, the “modest” two-year gain in bitcoin of 331% is more than enough for HODLers who have bought since the feeding frenzy of the past two years. The long-term time preference works for bitcoin because the fundamental value proposition has been true from the start and will continue to hold true for those who wait. Those who can’t wait are swallowed by the market for long enough in any market, just as we saw with 0% net gains for novice retail traders entering and exiting too much. The gains from deception, incentives, and cultural madness were fleeting, but the gains in Bitcoin use and adoption were real from the start.
Villains used to criticize Bitcoin for needing meme-stock speculators to make it work, but now that meme-stock speculators are gone, villains criticize Bitcoin for not having the speculators there. This is simply illogical and is proof that Bitcoin is not actually a Ponzi scheme. The same cannot be said for other cryptocurrencies. Ponzi schemes by definition cannot exist for decades, and the honesty in the current bitcoin price proves the honesty of the underlying value proposition. Yes, it crashes sometimes. This is an indicator of health and transparency. Something that rises and rises forever? It’s a Ponzi scheme and the bottom will always fall eventually.
No one sings “Pump It Up” anymore, and as fun and exuberant as the 2021 rally may be for a while, the space is really better without memories around. The time has come for a more advanced culture of development and adoption around Bitcoin, as well as a more mature price negotiation.
This is a guest post by Nico Cooper. The opinions expressed are their own and may not necessarily reflect the views of BTC Inc. or Bitcoin Magazine.