How Bitcoin Supercycle could become reality

[justdimin]

I think there is no need to predict it because it is already happening. We already hit a new ATH too early this year and for sure there will be more to come after the halving and on the 3rd and 4th quarter of this year. Money is one of the important things in this world but some don't wish anymore to have more of it. They are either rich or poor, and if someone badly needs a money they might actually sell their investment and that can affect their prices negatively.

We should not worry though, because like you said, the situation is still better nowadays and it may take some time again before the situation shifts from its other side but before that happens, I'm sure all of us are now prepared.

I do agree that it looks like we are going to have a good year, but also when something unexpected happens that could make people fear it. We expected ATH to be broken after the halving, it was blown over before the halving and this made people happy because they thought "if it got high this early, then it will be even higher later on" and they might be right about that there is no doubt about that but they could also be wrong and people who do not buy it currently are fearing that.

I believe that it will go up even more, I am on that side, but I totally understand the people who do not expect it to be any higher as well, those have their own opinions and predictions and who am I to judge anyone about anything in the end.

[virginorange]

1) More people HODLing for longer periods than 4 years. ... people with some savings can.

Governmental approval of Bitcoin makes banning much less likely, making longer term holding safer
It is not unusual to have savings. Many people have pension savings, some own property, a few own gold. Saving means trading [less consumption today] for [more consumption in the future] (e.g. during retirement). So selling Bitcoin to buy stocks or gold just trades one risk for another risk, but you still have risk. Even going 100% cash has risk because of inflation. If you plan to hold for more than 10 years, temporary drawdowns are not important, only permanent losses hurt you. The SEC decision, the ETF approval, MSTR, etc. have brought bitcoin more into the political power structure. The more Bitcoin is owned by the powerful people who set the regulations, the less likely we will see a ban and therefore a permanent loss of one's investment in Bitcoin.

3) More people buying into the falling knife in bear markets. Even with the current 70-80% bear markets, buying at less than ~33% of the previous top actually always has meant that you will be able to sell for profit in less than a year, and if you have 3 years time to HODL then you have profitted always even if you bought near the top (excluding the 69-73k run).

Limited potential for volatility reduction during bear markets, plenty of potential during bull markets, via more people selling into the bull market.

If you know a bear market is temporary you can buy the dip. However buying the dip is limited by liquidity (many become unemployed or higher bank lending standards). The S&P-500 has drawdowns of 50%. European stock Indizes have drawdowns of 75%. A minimum drawdown portfolio of 55% gold and 45% S&P still has drawdowns of roughly 30%. I don't see Bitcoin drawdowns to be fully eliminated.

The Bitcoin 90 day volatility of Bitcoin during bear markets is already only 2-3x higher than the S&P Index.


While during bull markets we see 6x higher volatility in Bitcoin vs. the S&P Index.


I think Bitcoin having a 2x higher volatility than the S&P Index is still justified. Maybe one day Bitcoin's volatility drops below the S&P towards gold, but probably not within the next 10 years. This seems to suggest that catching the falling knife is working.

However I see plenty of potential for lower volatility during the bull market. We could calm this volatility by holders selling more aggressively into the bull market. As a result we will get less extreme tops and also lower drawdowns from the top.

4) More people DCAing into Bitcoin, and not only while the bull roars.

The Bitcoin bottoms look stable, low Bitcoin valuation has very low volatility, therefore I think the DCA already works very well. I'm always happy to see more DCA, but most volatility is based in the bull markets not the bear markets.


The competent acitve-investor fraction will shift from real estate to Bitcoin as generations cycle
People who are not interested in managing their own finances will simply stick to what the financial advisor tells them to do and are likely to invest in long-term US bonds regardless of inflation and the US fiscal situation. Only a subset of people (i) have money to invest, (ii) are competent enough to stick to a plan, and (iii) are interested enough to manage their own finances. Let's call them active investors. Many active investors are long property and short paper, a historically excellent trade. Many are also long equities. Most wealth is controlled by old people who are very competent at executing what they know, but bad at learning new things. They will just keep doing real estate. However, as the generations shift, bitcoin (IT & private key management) comes easier than real estate (maintenance and tenant management). People who would otherwise have handled bank loans, tenants and maintenance will also be competent enough to hold Bitcoin long term or buy it cheap and sell it expensive. As bitcoin becomes more integrated into the financial market infrastructure, there will be also more arbitrage.