1/11 ANDY HOFFMAN (CryptoGoldCentral.com): What’s Wrong With Bitcoin?
In financial markets, rarely is ONE factor responsible for a trend – though of course, it can be. In gold, the reasons it trades at all-time inflation-adjusted lows are myriad – like “paper gold” dilution; government-sponsored price suppression; the emergence of Bitcoin; three-plus decades of anti-gold propaganda; and the lack of a material financial crisis. The latter, also a product of unnatural “market forces”; i.e., the commandeering of financial markets by governments and Central banks since the 2008 crisis, to suppress interest rates and support stock and real estate prices.
In Bitcoin, it’s easy to say its breakdown from the “Hoffman Line,” and failure to materially rebound, is simply due to the aftermath of the historic late 2017 bubble…that morphed into an even more epic altcoin bubble when newly minted crypto hedge funds launched in January 2018. Which of course, is a material factor – as unquestionably, the final stages of the 2017-18 boom were bubble-like; and equally unquestionably, what goes up must come down…particularly when referring to the dozens of worthless altcoins that pumped in the boom’s late stages.
However, it’s far more than that – as Bitcoin’s “story” hasn’t weakened; but to the contrary, strengthened; as even after the recent, predicable hash rate decline, it remains nearly three times the year ago level…and in fact, appears to have visibly bottomed from last month’s post-SV lows.
https://bitinfocharts.com/comparison/bitcoin-hashrate.html#1y
SegWit has proven to be a success, and new technologies like Lightning Network and RSK are taking the technology to a new level of utility – whilst transactions continue to explode, and the use cases of “competing” monetary assets, like gold and the dozens of fiat currencies trading near all-time lows, are weakening. Moreover, “flippening” worries have permanently dissipated – from BCash, Ethereum, and all other comers. So, why can’t Bitcoin get out of its own way, and materially rebound in price?
In my view, the breaking of the Hoffman Line – currently, at $5,700 – was of major significance…as below that level, institutions have no interest (or mandate) to invest; which in turn, prompts regulatory agencies to ignore ETF requests; venture capitalists, to stop raising investment capital; and miners, to reduce mining investment. That level provided MAJOR price support all year – but now that it’s been breached, is providing MAJOR price resistance.
Secondly, it cannot be overestimated how devastating the SV attack was – yielding a major decline in Bitcoin’s hash rate, a crashing price, and heightened uncertainty about its future. Not only have the “Hash Wars” caused these (in my view, intended) effects, but further clouded the age-old question of whether Bitcoin is a store-of-value, a utilitarian currency, or both. Not to mention, proved it is not as “anti-fragile” as suspected, given how much damage an obviously fraudulent scheme like SV caused.
Those in the Bitcoin community secularly believe the world understands this, but the fact remains that 99% of the investment community has not a clue – and thus, can be swayed by even the most ridiculous theories…like those from Roger Ver, Craig Wright, or anyone with enough crypto “cred” to have influence. Throw in the “risk off” mentality pervading the world’s capital markets, and you can see why Bitcoin – already, the world’s most volatile asset – is having such trouble stabilizing.
In my view, there is not a doubt Bitcoin’s mining network, technological development, and use cases will strengthen in the coming years – as increasingly, the world realizes we are entering a Digital Age. However, it is uncertain when Bitcoin’s price will respond, given its history of both long-drawn out trends…and sudden, monstrous price moves. Perhaps, 2019 will be just like 2017 – or, for all we know, 2015. Be prepared for both scenarios – as in investing, surviving is more important than thriving.