Is crypto a bubble? No. Is it a currency? Maybe. Is crypto here to stay? Yes.

As we sit here in the doldrums of the summer and with most crypto down about 50% off their all time highs, I think it's a good time to re-evaluate whether or not it's a bubble, will it collapse, and is it here to stay. As I wrote about earlier I think that we still have another 3-6 months before we can even imagine seeing new all time highs (https://thrivingwithinterest.blogspot.com/2021/06/another-50-bitcoin-price-correction.html). So this is a great time to take stock (pun intended) in where we stand on crypto.

Cryoto is slowly but surely becoming a more and more normal part of our investment landscape. Rewind the clock back a couple of centuries and stocks exclusive and "new" to most people (not to mention very volatile). A similar thing will ultimately happen to Bitcoin and other crypto. They will become more normalized and an accepted form of investment allocations. Even today stocks aren't the most stable of all asset classes. Think back to the past 18 months. They have seen some of the biggest falls of all time and one of the biggest rallies of all time, and this is 2 centuries + into its history. 12 years ago we had a similar drop due to the global financial crisis. So we should accept volatility in crypto as well. Vitalik Buterin said it best:

Will the volatility subside? Of course it will, but it may take time. Regulators will have a large say in this as Bitcoin is viewed as a threat to fiat currencies. They obviously don't like this and places like China can act quickly (as they have done in the past few months) to curb/regulate crypto efforts. Western Europe and the US may do the same, but it will take some time. Newsflow here (and tweets from Elon Musk) will undoubtedly have an effect on the price for some time to com.

Crypto can be considered a store of value, a platform to develop new technologies with the expansion of the blockchain, formation contracts, etc... As of today it is much less a currency, although it may become used more as a currency in the future (that's not a controversial thing t say in that it is barely used a currency today!). I can foresee more and more people using crypto for remittances in places where the traditional banking system has let them down.

Will the crypto bubble burst and will it's value go back to zero? The answer has to be a resounding NO. We have had some harrowing falls (see the chart below) and of course the hash rates and price has fallen a lot, however we have not had any institutional blowups and it is still here. If it was going to have gone away, it already would have done so at this point.


This has not slowed down the efforts by institutions to create ETFs, invest part of their treasury into the asset class, and development of new technologies using blockchain. We just need more people to come to grips with it being here. People will never fully understand it because it has attracted some of the brightest minds to develop new and extraordinary applications with it. This reminds me of the early days of the internet which people thought it was a scam (remember the Amazon.bomb stories). Do any of us truly understand how it works and the technology behind it? Not really, but do all of us use Amazon and other retailers to purchase good and services online? Absoltely!

Bitcoin is a competitor to gold and as long as institutions, rich individuals and the broader public continue to plow in a small fraction of their overall cash reserves/net wealth into Bitcoin, it will ultimately continue it's rise to new highs. Ethereum has more of a calculable value and will continue to rise (just like stocks do) so long as more contracts and applications are developed on the platform. Therefore I just don't see how it will go to zero (as many naysayers proclaim) from here on out. I think we are past the point of no return.

Bottom line is this. We should enjoy this period of relatively low volatility in the asset class to educate ourselves, position our portfolios and ultimately come to grips with the fact that it is not a bubble, it might become a currency and it is here to stay! Here are the Bitcoin and Ethereum volatility graphs:

bitcoin vol.
ethereum vol.

Happy investing...




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