If it’s not the most controversial investment, it’s probably the most discussed. With Bitcoin (CCC:BTC-USD) recently hitting an all-time high of just under $65,000 according to data from Coinmarketcap.com, the original cryptocurrency has hit the perfect pricing threshold, justifying both the bullish and bearish narrative.
On the optimistic front, the mystical six-figure level which was once deemed a mental illness for those who suggested such craziness is now a stone’s throw away on a percentage basis.
From its peak, it’s just a 54% move. Yes, an incredible rally to be sure but for Bitcoin, it’s truly nothing. At the dawn of the crypto concept, BTC was priced like a penny stock.
Of course, pessimists will counter that all extreme rallies come to an end or at least correct sharply. Even if you’re an ardent supporter of Bitcoin, you can’t help but feel some concern about its meteoric rise. Let’s face it – BTC doesn’t offer unique utility. Other blockchain-based projects have come along since Bitcoin’s introduction, offering faster, more secure and innovative solutions.
In other words, Bitcoin has value because others believe it does. As much as intense collective sentiment can take BTC to $100,000 or higher, the loss of such can quickly plummet the crypto coin to zero.
Still, CollegeFinance.com reminds us that what we believe about the fundamentals for Bitcoin may not matter if the emerging Generation Z decides to sustain the crypto market. For instance, Gen Z takes investing seriously, with 34% of college students and recent graduates starting their portfolio in 2020.
Further, next to individual stocks, young people consistently put their money into Bitcoin and popular altcoins (alternative cryptocurrencies). Thus, BTC could still make big gains from here.
Bitcoin Shows First Real Sign of Weakness
As meme stocks have proven, sometimes it doesn’t matter what you believe about the fundamentals. If the market decides to bid up an asset, there’s not much an individual investor can do about it. Further, with both Gen Z and millennials supporting Bitcoin, it’s possible they can impart a broader paradigm shift.
After all, baby boomers aren’t getting any younger. Sorry to be cruel but their next life stage is death. In contrast, Gen Z can look forward to their prime earning years. Therefore, if they continue to believe in cryptocurrencies, Bitcoin at $100,000 might be a bargain.
But before you dive into BTC, it’s worth pointing out that according to CollegeFinance.com, among the young adults who invest in crypto, an alarming portion (51.6%) don’t have any strategy. That tells me that virtual currencies could just as easily become a flavor of the week for them.
More importantly, Bitcoin has been pinging weakness over the last few weeks. Primarily, BTC has been bleeding positive momentum following successive corrective periods. For instance, each time the digital token initially touched its 50-day moving average since September 2020, the subsequent response has declined in magnitude.
- On June 11, 2020, BTC hit its 50 DMA at $9,321. It later peaked at $12,254 before correcting, for a gain of 31%.
- On Sep. 2, BTC touched its 50 DMA at $11,052 and peaked at $40,797 before correcting. The move in this cycle was 269%.
- On Jan. 27, 2021, BTC scraped the 50 DMA at $30,432 and peaked at $61,243 for a 101% profit.
- On March 25, BTC again hit its 50 DMA at $51,704 and peaked at $63,503 for a modest 23% gain.
As you probably know, BTC later dropped to its 50 DMA on April 18 at a price of $56,247. As I write this BTC has descended below the $50,000 mark.
Extreme Speculation Has a Poor History
When people criticize Bitcoin, the mentioning of tulip mania is never far behind. Naturally, crypto advocates become defensive when this is brought up, noting among other arguments that the blockchain has sparked a sustainable digital ecosystem that now has a longer-than-a-decade track record.
I’ll leave you with one final tidbit from CollegeFinance.com. Among young crypto investors, Bitcoin ranks as the most popular asset, which is encouraging, all things considered. But the second most popular crypto is Dogecoin, slightly beating out Ethereum (CCC:ETH-USD). That is definitely not encouraging.
While young people throughout history have always bragged about their wisdom, the collective Dogecoin allocation suggests otherwise. Indeed, extreme speculation has always ended badly, whether you’re talking housing in the mid-2000s, the tech bubble of the late 1990s and yes, tulip bulbs.
Adding to the concerns, Bitcoin seems like it’s losing its breath. If BTC falls, more than likely, the others will too. If you must proceed at this level, do so carefully. For everyone else, stay away for now.
On the date of publication, Josh Enomoto held a long position in BTC, DOGE and ETH.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.