The Bitcoin Bear Market Isn’t Done
Tags: Ethereum, ICO, Bitcoin, Investing, Blockchain

This isn’t the first time this has happened. In 2014 there was a huge run-up in bitcoin value with a brief spike over $1000. While this seems a paltry sum now, just months before bitcoin was trading at a little over $100. Then it crashed, and it wasn’t until nearly 3 years later that those who invested near the peak broke even.

In some ways, the recent run was more leasiurely. Since January 2017, Bitcoin trippled to over $3000, then trippled again to $9000, then doubled to over $18,000 before the crash. This is very different than the single month 10x climb that bitcoin had in 2014. Still, the history is instructive — it make take years before bitcoin starts heading back towards its old peak.

One critical difference

There’s one massive difference between now and 2014 — Competition. In 2014 there was no appreciable competition in the crypto space. There were a few clones such as Litecoin and dogecoin, but little substantial technical improvement and certainly nothing that could compete for mindshare.

This is no longer the case. Bitcoin is still the standard bearer, but it is flanked by Bitcoin Cash, Ethereum, Dash, EOS, ZCash, Ripple, and the countless other ecosystems that exist and continue to spawn.

Bitcoin was a brilliant investment when it was in a field of one. But now, it must compete against new technology that’s faster, cheaper, more capable, and thanks to ICOs — can afford to advertise and gain mindshare.

Billion Dollar Bets

Take for example Block.one: the company backing EOS has a nearly $1 BILLION dollar warchest. To put that in perspective, if Block.one recieves only a paltry 5% return on this cash they will be able to spend $50 million every year and never touch the principle. They can launch project after project, ad campaign after ad campaign… and never run out of money.

While this is an outlier, other firms such as Ripple Labs have been able to position themselves similarly. ICOs that “only” raised $20–40million can spend hundreds of thousands to millions a year and never slow down.

Both Block.one/EOS and Ripple and others have every incentive to try and be the “next bitcoin” or “next ethereum”.

They have nothing to lose and everything to gain. I expect that when they are ready it won’t be bitcoin in the news any more. And when that happens, the bear market (for bitcoin anyway) will get even deeper.

Bitcoin isn’t Blockchain

I need to be clear: bitcoin isn’t blockchain. While I expect bitcoin to have ongoing market difficulties, blockchain will do very very well. Bitcoin’s not going away, but we saw an 80% correction last time and that was without the competition. When the market springs back, it’s still not clear how much of that market will still be interested in Bitcoin vs the shiny, well monied altcoins and dApps that will be fighting for that inflow of capital.

For bitcoin at least, I don’t see the bear market ending anytime soon. I’ll probably wait to $4k or below, at least, before I buy back in.

* this isn’t investment advice, I’m just saying what I’m up to. I own zero bitcoin right now.

Edit: I published a follow up: https://medium.com/datadriveninvestor/blockchain-tokens-will-keep-falling-count-on-it-af74d440e49a

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