Over the past year and a half, I earned a reputation as InvestorPlace’s unofficial “cryptocurrency guy.” But with the benchmark bitcoin price melting down after a meteoric run to nearly $20,000, the segment has gone quiet. That said, we’re witnessing a recent resurgence in the blockchain space, so here I am.
To celebrate my return to cryptocurrency editorialism, I wanted to go deep. Numbers and stuff. I intended to write the kind of article that would both earn me respect from my editors, as well as their frustration as they poured over the data. But then I realized that going that route would completely negate the point about investing in bitcoin.
The cryptocurrency concept has two seemingly related components: the blockchain platform, and the investment thesis for bitcoin and other digital assets. A common mistake is assuming that blockchain’s many complexities have some correlation with crypto valuations. I’ve seen many convoluted write-ups in this sector that explain everything without explaining anything at all.
In reality, whether a cryptocurrency rises or falls depends on investor sentiment. If demand exists, that particular token will likely increase in value. If not, the price will plummet. It’s that simple.
Admittedly, bitcoin is cloaked inside this new blockchain technology. Because of the decentralized, open-source nature of the platform, bitcoin trades at all hours of the day (and night). Moreover, a regulatory body doesn’t exist. Essentially, the users police themselves. These and other eccentricities give the appearance that virtual currencies are different than any other investments.
They’re not. Of course, bitcoin and the blockchain represent the evolution of financial technologies. But the investment catalyst — supply and demand — has remained the same since the beginning of civilization. The only thing that has changed is the target vehicle.
Bitcoin Is All About the Basics
Why go through this rudimentary lesson? I genuinely believe that with the cryptocurrency market, prospective buyers are tempted to run before they walk. Again, notice that I wanted to dive into the numbers and forego the bigger picture.
However, the bigger picture offers the best argument for bitcoin and its strong probability of moving substantially higher. As I mentioned before, if demand exists, the price will follow. For the “king of cryptos,” demand has never been stronger.
On April 26, daily bitcoin transactions numbered 381,209. About two weeks prior, this metric nearly hit 403,000 transactions. Keep in mind that the record for transactions in a single day is 490,644.
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Furthermore, average daily bitcoin transactions on an annual basis has consistently ticked up since the blockchain’s introduction. The one exception is 2018, when crypto-mania faded throughout the year. Still, in 2019, the average daily transaction volume has spiked up to nearly 326,000. We’ve never seen demand like this before.
This is also one of the reasons why I don’t believe bitcoin is a popped bubble, or a pyramid scheme. Those who compare the cryptocurrency to the tulip mania of the 17th century speak out of unawareness. Let me be crystal-clear: I don’t mean that as an insult. Instead, I’m merely saying that the bears haven’t had a chance to look at the transaction data.
We have a very simple argument here. It’s illogical to characterize bitcoin as a failed investment when it’s obvious that engagement and adoption is only moving higher. You didn’t see that with tulips. The volume simply collapsed. Also, you didn’t see that with the spectacular crashes of once-vaunted tech firms in the early 2000s. Demand went to zero.
Bitcoin? I see many zeroes, but with a real number in front.
The Silent Bull Market Beckons
Previously, I relied on arguments of ever-increasing complexity to justify my bullishness toward the blockchain markets. As with anything, there’s a time and place for that. But right now, the only argument you need to focus on is that more and more people are using bitcoin.
Therefore, we’ve established that demand is both robust and growing. The only question mark is bitcoin’s speculative value: what is someone willing to pay for a unit of this cryptocurrency?
I don’t want to make myself look foolish with a specific number. But my guess is that we’re going to exceed well beyond the last threshold of $20,000. I simply go back to the transaction volume.
If ever a time existed to give up on cryptocurrencies, it was last year. Imagine that at one point, bitcoin incurred an 84% loss last year! That’s a horrifying statistic, yet the day-to-day demand continued trekking forward.
Essentially, what we have here is a silent bull market. Once the speculative fever died down, the mainstream media no longer paid the sector much attention. What they missed, though, was that core engagement held strong, even if the price failed.
But now that the bitcoin price is firmly above $5,000, the mainstream is again interested. This time, though, the narrative has changed. The major cryptocurrencies have survived their baptism of fire. That confidence alone could drive the sector to unprecedented heights.
As of this writing, Josh Enomoto is long bitcoin.
