President Trump rails against fake news, and for the most part, he is correct. The liberal mainstream media throttles him and his administration with multiple, unfounded accusations, hoping at least one of them would stick. But I would also argue that the current “bitcoin bubble” stories are generating just as much fake news, if not more so.
With bitcoin prices largely soaring through the roof, the most prevalent emotion aside from sheer elation is regret. When all the nasty remarks have died down, most analyst and pundits realize that they could have enjoyed life-altering profitability, even up to just several weeks ago. Instead, they wallow in their self-imposed misery, venting their frustrations publicly.
Given this backdrop, any drop in the cryptocurrency markets is justification for creating bitcoin bubble fears. Bear in mind that a great number of these “fake news” stories lack broader context and are therefore more akin to propaganda than actual business reports.
Here are three examples of deceptive bitcoin bubble stories:
Bitcoin Plunges $1,000…Oh No!
On Tuesday, CNBC gleefully reported that Bitcoin prices plunged $1,000 in less than one hour. While technically, the business media outlet has their facts correct, I find the phrasing of the terms “plunges” and “$1,000” and “less than one hour” quite suspicious.
Whenever you’re dealing with a publicly-traded asset that’s priced well-deep into five-digit territory, a $1,000 loss isn’t what your mind initially believes it to be. Using the bitcoin prices that CNBC referenced, magnitude-wise, the loss came out to 5.67%.
Many bears will counter that what we’re currently experiencing is a more serious collapse. While true, they also fail to mention that every single time, Bitcoin has come back harder and stronger. Perhaps it’s because you can’t keep a good idea down?
Bitcoin is the Most Crowded Trade Right Now
Market pundits are advising people away from the “bitcoin bubble” on the basis that the cryptocurrency is currently the most crowded trade. I find that extremely hard to believe, considering that multiple exchanges throughout the world exist, all to trade the same asset.
If you want crowded, you should look no further than the traditional stock market. Here, we have market participants funneled into a centralized exchange, with centralized rules, procedures, and schedules. This dynamic doesn’t just create a crowd, it forces a bottleneck.
Besides, isn’t a truly crowded market a good thing? The last thing you want to see as an investor is a thinly-traded market. These tend to have poor price discovery (ie. extreme volatility) and liquidity could be a major problem when you eventually want to cash out.
Bitcoin Cash Will Kill Bitcoin
A common (and I would say, artificial) fear is that the rise of Bitcoin Cash (or any other crypto alternative) will kill bitcoin prices. Again, this is a deceptive, fake news argument. The only thing Bitcoin Cash is doing is helping to reduce bitcoin dominance.
In the long-term picture, this is a positive development. You never want any one asset to dominate the entire industry. Competition and the free markets catalyze economic movement. In this case, having cryptocurrency alternatives allow people to choose their asset based on their personal scalability needs.
Furthermore, reducing bitcoin dominance has been a net positive for bitcoin prices. An argument could be made that without the abundance of choices, bitcoin would take a lot longer to drive up to $10,000. With such a robust marketplace now at hand, the journey to $100,000 should take a lot quicker than previously thought possible.