“Bear markets are the best time to be alive and in the business. It’s depressing for those who don’t know what they’re doing, it’s great for those with a longer term view. –Simon Dixon
The difference between bitcoin and everything else is that the price of bitcoin doesn’t matter. Over the long term, the price of bitcoin has risen, yes, but the value proposition of bitcoin as hard, non-confiscable, and truly decentralized money is really what matters. Not the price hype and not the pump. This is why traders and speculators have lost interest in Bitcoin and continue to flock to the newest decentralized finance (DeFi) or non-fungible token (NFT) project in the blink of an eye. This loss of interest from speculators is seen by many as a negative development for Bitcoin, but it is actually a very positive development. What we now see represented in bitcoin’s lower price is the value of its actual functional utility and the lack of retail speculative capital that existed before. This article will describe why this is a good thing.
Ever since its inception, misguided analysts have portrayed Bitcoin as a Ponzi scheme dependent on continuous artificial speculation pumping into space. As any experienced person can tell you, speculators are inherently shiny object hunters and will retreat from any position as soon as something brighter presents itself. Well, the bitcoin “bear market” has arrived and all the speculators are gone. They got bored and took their toys home. Even with their demise, bitcoin is still valued well above its 2020 and 2021 lows and increasing adoption at the institutional (and sovereign) level. This adoption represents real value.
The stock market sugar rush caused by the Federal Reserve printing money and negative real interest rates is coming to an end, and the roller coaster is now descending from the top. This has impacted not only bitcoin, but also the stock market and other altcoins. Simply put, everything falls apart and once the chaos subsides, we will see which assets, actions and projects actually offer tangible and objective value. This is what investing was always meant to be. Despite the confusing dichotomy between “growth stocks” and “value stocks”, investing is by definition supposed to be about your long-term belief in the value something, not in its short-term growth projections. Retail investors have struggled to understand this due to the market’s culture of get-rich-quick and individual genius in recent years. Indeed, if an asset like bitcoin is not consistently appreciating in the double or triple digits, then it is a “failing” asset for these people. The market is on its head. As a result, the stock meme crowd is now out of bitcoin, just as they are out of the stock market as a whole. Turns out mememers had paper hands all along.
This Bloomberg article, titled “Day Trader Army Loses All The Money It Made In Meme-Stock Era,” details how many new traders who entered the space “never saw a market that wasn’t backed by the Fed”. Retail traders have lost all of the gains they made from the Dogecoin, AMC, and GameStop rallies, and are right back at square one.
The whole market is down right now and we need to rethink what a “good investment” is. As the chart above from Morgan Stanley shows, overall retail trade moves have canceled out to zero since January 2020 despite their temporarily outsized gains in 2021. If we compare today’s bitcoin price to the price of January 2020, we still see a 331% gain for bitcoin, outperforming the S&P 500 by a wide margin and beating overall retail earnings by absolutely nothing by a margin of infinity. Do we need more proof that HODLing is a superior strategy?
Yes, bitcoin is down to half its all-time high, but taking into account the incredible market distortions caused by unprecedented money printing, memestock manipulations and post-COVID-19 interest rates since the start of 2020, bitcoin is still blowing everything else out of the water. We just need to zoom out to a more “honest” market window to see that. Everyone is acting like the sky is falling on us, but again, that’s only because most retail investors only entered the market in 2020 or 2021 and never saw a market that didn’t. was not supported by the Fed.
There is a culture of “weak (i.e., long-term) time preference” in the Bitcoin community today, which basically thwarts Ponzi speculators who need quick wins all the time. The high (short-term) time preference fuels the perpetual “passive income” lie that beginners always fall for. In contrast, the “modest” gain of 331% in bitcoin over two years is more than enough for HODLers who have been buying since before the feeding frenzy of the past two years. The long-term time preference works for bitcoin because its fundamental value proposition has held true since its inception, and it will continue to hold true in the future for those who wait. Those who can’t wait are swept away by the market for long enough in any market, just as we saw with the 0% net gain for newbie traders who get in and out too much. The gains caused by hype, stimuli, and cultural madness were fleeting, but the gains in utility and Bitcoin adoption have been real from the start.
Critics have criticized Bitcoin for needing meme stock speculators to make it work, but now that the meme stock speculators are gone, critics are criticizing Bitcoin for the speculators not being there. It is simply illogical and proof that Bitcoin is not actually a Ponzi scheme. The same cannot be said for other cryptocurrencies. Ponzi schemes, by definition, cannot exist for decades, and the honesty of bitcoin’s current price attests to the honesty of its core value proposition. Yes, it sometimes goes down. It is an indicator of health and transparency. Something that rises and rises and rises forever? It’s a Ponzi scheme and the bottom will always fall.
Nobody’s singing “Pump It Up” anymore, and despite the fun and euphoria of the 2021 rally for a while, the space really is better off without the memes around. It’s time for a more adult development and adoption culture around Bitcoin, and it’s also time for a more adult pricing conversation.
This is a guest post by Nico Cooper. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.