I think about this a lot. What happens next? Is Bitcoin dead? Did it already peak and the glory days are behind us? Or, are we just getting started?
Let’s take a look at a historical chart of Bitcoin (below).
If you look at this chart you can see that BTC is trading at/near the pre-pandemic trading price. It may hurt to look at this, but it is a helpful exercise.
So here is the exercise. Look at the two ‘orange’ arrows on these charts. There is a catalyst in there somewhere. Something happened that caused another thing to happen. Well, that’s how it should work.
In a traditional stock that is issued by a publicly traded company, there is a catalyst (both good or bad). Typically, this would be a positive earnings report, a new product is launched in the market, or a company files for bankruptcy. All of these impact the value of the stock.
Good news = increase in stock price.
Bad news = yep, you guessed it (you’re so smart).
So what drives Bitcoin’s price? I used to think that it was similar to a stock. Actually, I still do. But I feel like we may have moved away from these principles.
Let’s take a look at the 1st Arrow on that chart:
I’ll call this Phase 1 for the sake of simplicity (creative, I know). During Phase 1 Bitcoin gained major traction with retail investors. Why? This was the first time that retail investors could purchase Bitcoin with ease.
While things weren’t as simple as they are today, the foundation was being laid. Retail Investors understood that you had a have a wallet (like Ledger) and that once they purchased their Bitcoin they would send their balance to their wallet address. Additionally, there were (for the first time) applications and softwares for investors to track the value and performance of their portfolio.
Prior to 2017, there weren’t a whole lot of products that helped investors research Bitcoin prices, make purchase & send to cold wallet, or keep track of the performance of their portfolio. Prior to 2017, myself and just about everyone I knew would research BTC price by googling it and then calculating that price by the amount of bitcoin we owned.
Seriously, that is how people knew the value of their asset.
No shit the price took off as soon as people started building apps and products for consumers (duh).
Now let’s take a look at (you guessed it) Phase 2:
What happened in between the recovery in late 2018 to early 2020 that caused the unprecedented bull market through the end of 2021?
I know I called this Phase 2, but really this should be considered the Exchange Phase. By 2019 there really wasn’t any excuse for people to not invest in Bitcoin (or crypto for that matter). By the end of 2019 exchanges like Robinhood and Coinbase (and others) had amassed over a Billion dollars worth of investments. These investments were for the sole purpose of market penetration. Buy as many customers as possible. Capture as many eyeballs as possible. Get as many users as possible, no matter the cost.
Yet again, I ask: “what caused Bitcoin’s bull runs?”
The answer: New Products
Products that increase the exposure and reduce the barriers to entry. Products that make investing in stocks and bitcoin as simple as swiping up (cough cough robinhood).
CNBC Reported on July 22, 2019 that Robinhood raised $323M, which increased their valuation to over $7B!
What the hell were they doing with all that money?? Their app is pretty slick, but they aren’t spending 1/3 of a Billion dollars on UI and widgets.
That money was put towards mass adoption. The more people using their services the more money they made. Simultaneously, they brought new invetors into the game. Causing massive increases in value across the board, specifically with Bitcoin.
The Burning Question: “Will there be a 3rd Phase of Bitcoin?”
Maybe?
Maybe Not?
To be honest, it’s hard to tell. Right now, it feels like the majority of people look at Bitcoin as a storage of value. You hear “digital gold” all the time.
To me, and this is just my opinion, it feels like the crypto community as a whole was kicked in the nuts pretty hard this past year. People are leaving the market in droves, especially with what transpired with FTX and that loser of a human Sam Bankman Fried — or however you pronounce it.
Personally, this gives me some optimism. Since our last bull run ended in 2021 there is a lot of sitting around and waiting.
If history tells us anything, people need to get to work. If we want Bitcoin to increase in value, then damnit we need to build products around it. The process of buying, exchanging, and selling bitcoin needs revitalized. We don’t need another crypto exchange. We need products that encourage mass adoption, just as other products did before.
If you want to read more check out my blog. I wish I could say that it will be released on a schedule, but that would be a lie. I have kids, a career, and a life. I’ll never be able to post on time.
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PS - I am not proofreading this. Posting this straight off the dome.
Love you all - now let’s go build some kickass products.