If History Repeats, Bitcoin Price Can See Epic Squeeze Followed by Crash
The Bitcoin bulls are enjoying a well-earned victory lap, but 2017 taught us that it's possible to go too far.
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Ten years ago, if you had said Bitcoin’s price was headed to $100,000, most people would have asked you what Bitcoin was.
Five years ago, if you had said Bitcoin’s price was headed to $100,000, the biggest names in the financial industry would have said you were dreaming.
A year ago, when the cryptocurrency market was trying to emerge from a bear market, if you had said Bitcoin’s price was headed to $100,000, most of the financial industry would have said the bear’s claws were too sharp.
Now, those same $100,000 callers are enjoying a well-earned victory lap. You can't argue with price, whether you agree with Bitcoin's use case or legitimacy. Price today, whether fleeting or lasting, is price today. And price is all that matters.
I’ve witnessed too many bulls and too many bears try to bend prices against the market’s will.
And I’ve never witnessed a single one come out ahead.
From a trader’s perspective, Bitcoin, courtesy of the iShares Bitcoin Trust Beneficial Interest ETF IBIT, has provided the volatility and liquidity a trader like me loves to see in an equity. The options liquidity didn’t skip a beat when it opened.
MicroStrategy MSTR offered a leveraged entry into Bitcoin. Of course, you could also trade the 2x levered MicroStrategy if you enjoy high blood pressure.
The number of ways to gain access to Bitcoin is increasing every week. Companies are increasingly establishing a strategic reserve for Bitcoin. For some, it appears a logical extension of their business, such as cryptocurrency miners, data centers and even financial-related firms.
But there is also a bit of a 2017 feel to the move. That’s when companies began adding "blockchain" to their name in an attempt to capture market value. Now, we have companies who are pivoting their entire business model to building Bitcoin reserves and leveraging the financial markets to grow those reserves.
Admittedly, it is better than just adding a word to the company's name. Still, unless those companies also maintain a business that is producing free cash flow, we may cross into dangerous territory for Bitcoin for both bulls and bears. We could witness a squeeze of epic proportions followed by a crash that destroys companies and portfolios. One thing is for sure, Bitcoin is going to keep the market on its toes in 2025.
At the time of publication, Byrne had no positions in any securities mentioned.
