We are in the early stages of a new Bitcoin bull market. Let’s explore what we know about such bull markets based on observations from the four major hype cycles that Bitcoin has already undergone. Bull markets start off relatively slowly because of an overhang of potential supply. Firstly, some who bought at higher prices in the prior cycle and are looking to be “made whole” so they can escape their positions, plus whales who wished they had cashed in near the top. Before it is clear the bull market has begun, there is a period of steady accumulation as “weak hands” are liquidated and replaced by “strong hands” who have long term conviction in the value of Bitcoin.
In a bear market, good news doesn’t matter. Every rally is sold off and hopes are pitilessly crushed. The bull is the opposite. Bad news no longer matters and every dip is met with eager buyers who are looking for suitable entry points into Bitcoin. Once the prior all time high is breached, there is no longer an overhang of supply. The price is free to run wild in an “open field”. This is when Bitcoin’s price appreciation begins to accelerate its pace. Once a new Bitcoin all time high is made, new highs trigger a feeding frenzy. Media attention returns and new entrants are attracted by the allure of quick profits, driving prices higher even faster. Prices eventually reach a crescendo top.
Bitcoin’s price action is parabolic in nature during a bull market. This means that much of the price appreciation happens in a short time window at the end of the bull market. The last $5000 of appreciation in the previous bull happened in a matter of days. There will be several moments during the bull market where major corrections will mistakenly be called “tops”. Several prominent commentators made the mistake of calling tops for Bitcoin at $5000, $9000 and $15,000 in the prior bull. The same will happen again in this run.
One sure sign a Bitcoin bull market is coming to an end is the sloppiness of the trading. Large inter-exchange spreads, major price “gaps”, and the inability of exchanges to stay open during the mad final rush of profit-motivated speculators are major warning signs. Very few people correctly anticipate how high the market will go and most will be shocked by the final peak. This is the bull market when Bitcoin achieves geopolitical significance, so everyone will be watching. The feeding frenzy may be like nothing we’ve ever seen.
How many times did you have to hear about Bitcoin before you were ready to acquire some or, at least, explore its significance? This number of “touchpoints” is an important factor in the process of Bitcoin’s monetization. We now know that the process of Bitcoin’s monetization is occurring in a series of hype cycles where the magnitude of each cycle is defined by the people “reachable” in that cycle. Which people defined the prior cycles? The first hype cycle in the Bitcoin market was dominated by cryptographers and cypherpunks who were already primed to understand the importance of Satoshi Nakamoto’s groundbreaking invention.
But even among the cohort of cryptographers and cypherpunks primed to understand Bitcoin, some of the most brilliant required multiple touchpoints before being convinced that Satoshi was onto something. The second hype cycle attracted those with an ideological affinity for Bitcoin’s freedom promoting potential (i.e. libertarians).
One lesson to take away is that if a person is not reachable in a particular hype cycle, there is almost no point is trying to convince them of Bitcoin’s importance. At best they would view it as a quick trading opportunity. To be “reachable” to Bitcoin’s potential most people will typically have to have heard about it multiple times from multiple people that they trust. One sign that a new group will become reachable is that a respected person in the group becomes an evangelizer to the group.
Another way a person can be primed is if they made a small allocation to Bitcoin (or received it as a gift) and saw that grow in a prior cycle. They will already be awake to the financial potential of a larger allocation and more receptive to learning more. We recommend to use our wallet when comes to store Bitcoin safely. Its richness of features make Melis the wallet able to satisfy any need, both of safety and utility, requested by the user. There are simple wallets for smartphones without security features or very secure desktop wallets for managing your savings that are quite unpractical to use. Melis offers the best of all worlds: simplicity and security for desktop and mobile, in the same application.
However, for those who are ideologically opposed to Bitcoin there is no number of touchpoints that will convince them of its importance. Think of people like Paul Krugman or Nouriel Roubini. They will be walking around with wheelbarrows of worthless fiat money before owning bitcoins.
So when explaining Bitcoin to friends, family and colleagues get a sense of how “primed” they already are. Have they already heard of it? Are they curious or dismissive? Are they ready for a tiny allocation, or are they ready to take the leap? In the coming hype cycle, the people most ready to increase their allocation to Bitcoin are those who were already curious about it and perhaps had made a small allocation to it in the prior cycle. They are ready to be activated in the next bull run and will define its size.