Dr. K's Crypto-Corner
by Dr. Chris Kacher
Riding the Revolutionary Rocket with Cryptotechnologies... Entirely Evolutionary™
The current crypto bear market is due much to the network value well exceeding the number of transactions at the end of last year. The last time this happened was in late 2013 and resulted in a correction that did not find it's low until Jan 2015. It then took until 2017 for bitcoin's price to regain old highs around 1100. Once this happened, bitcoin skyrocketed for the remainder of 2017:
The current correction is the steepest correction since 2014 when bitcoin corrected -85%. Bitcoin has corrected beyond 75% four times since 2010. This is nothing unusual.
I believe bitcoin will find its major low, possibly around 5000, sometime later this year, and could happen much sooner than anyone expects, ie, on the order of weeks. Numerous major tailwinds are headed its way:
1) Institutional capital is coming online with various platforms being established by major institutions such as CME and Goldman Sachs.
2) Major governments are aligning themselves with blockchain technology
3) Bitcoin's killer app is its store of value. Bitcoin's superior network effect gives it a superior store of value, even to that of gold: https://www.virtueofselfishinvesting.com/reports/view/market-lab-report-bitcoin-vs-gold
4) 3 billion of the world's unbanked and another 1 billion partially banked are starting to use bitcoin via mpesa/bitpesa
5) Rootstock enables bitcoin to emulate ethereum as it enables smart contracts on the bitcoin platform making it competitive to ethereum. Bitcoin also brings along its superior network effect and hashing power, thus should maintain its lead as the more secure network.
6) Bitcoin's Lightning Network
7) A major devaluation in fiat potentially within the next 2 years due to unprecedented levels of global debt. The US Federal Reserve will find they can no longer hike rates beyond the next few rate hikes, thus will have to reverse course. Bridgewater's Ray Dalio, bond king Bill Gross, legendary investor Jim Rogers, and even former Fed Chair Alan Greenspan are all saying quantitative easing has flooded the financial system with some countries such as Germany and Japan sitting with negative rates, thus will not end well with a material devaluation of fiat likely.
8) Decentralization of the financial sector.
9) Bitcoin's maximum mint of 21 million coins makes it deflationary as opposed to all fiat currencies which are inflationary.
10) Tim Draper and Twitter CEO Jack Dorsey have said cryptocurrencies will overtake fiat in 5 to 10 years. As shown in the chart below and as I wrote in an earlier piece, given the exponential price rise of bitcoin, it should exceed the US M1 money supply by 2022. In other words, it will overtake the world's reserve currency by 2022. Note, Bitcoin Money Supply = Bitcoin Market Capitalization. The steep exponential trajectory shown below is equal to the rise in price of bitcoin. While the slope of the chart below has been slowing somewhat, other factors may sustain or steepen the current slope.
If 2015-2016 is any guide, it may take another 1-2 years for bitcoin to regain old highs around $20,000. But given the major tailwinds at bitcoin's back as shown above, it may reach its old highs of around $20,000 ahead of schedule.