ANALYSIS: I’m putting out this time-sensitive alert to all our readers and fans who currently own Bitcoin. While Bitcoin is infinitely more honest than any central bank or government-run fiat currency system, it is also subject to extreme volatility and buy/sell manipulation by nefarious parties such as governments. As Bitcoin skyrockets past $2200 (USD), a very large correction now looks imminent.
In 2013, I issued a public warning that Bitcoin was wildly overpriced, urging people to sell the peak. Within 24 hours, Bitcoin plummeted more than fifty percent in value. Now, almost four years later, all the signs are telling me that Bitcoin is due for another very large correction — I estimate a roughly 1,000-point drop — which could cut its current value in half (compared to fiat currencies such as the USD).
Bitcoin has achieved an extraordinary rise over the last 12 months, skyrocketing from about $600 to a recent peak of $2300. In just the last month, it has more than doubled its value, achieving an almost parabolic rise that is clearly unsustainable. While the long-term prospects for Bitcoin are strong — and I believe it will achieve $10,000 per Bitcoin in the years ahead — this recent parabolic rise is a sure sign of “irrational exuberance” now rearing its ugly head once again. Some people call it “Bitcoin fever,” and it has all the signs of tulip bulb mania, especially in Japan where Bitcoin purchases currently carry an astonishing 20% premium over the same purchases in U.S. dollars. (That’s an inescapable sign of irrational panic buying if there ever was one…)
To be clear, I am pro crypto currency and I believe Bitcoin will experience huge growth in value when the global banksters’ debt Ponzi scheme starts to crash… which could begin later this year, says David Stockman. “What the market is saying is we have reached the point of full employment forever. There will never be another recession or any kind of economic surprise or upset or dislocation. The market is pricing itself for perfection for all of eternity. This is crazy. . . . I think the market could easily drop to 1,600 or 1,300. It could drop by 40% or even more once the fantasy ends.”
I also believe our world is rapidly approaching the end of the era of central banks (and all the evil currency manipulation and counterfeiting that goes along with them). Once the global debt pyramid scheme really starts to unravel, Bitcoin could hit seemingly incredible valuations such as $10K or more… but this all depends on the internet staying up, computers staying online and sufficient redundancy in the blockchain to maintain the integrity of the Bitcoin transaction ledger. If the global crash is truly apocalyptic, Bitcoin could vanish and be worth nothing… but you’ll be too hungry to notice, since most of the world’s population will be facing starvation and mass death anyway. Barring that worst-case scenario, Bitcoin is likely to experience a vigorous, long-term rise in valuation, even as it undergoes a daunting roller coaster ride of volatility along the way.
Right now, hovering around the $2200 mark, I believe that Bitcoin is significantly overvalued due to recent spikes in purchasing which are largely based on irrational speculation. The “buy Bitcoin” rally cry is out-shouting the more rational voices which are attempting to treat Bitcoin as a real transactional currency rather than a speculative investment vehicle. The problem, of course, is that volatility scares away potential merchants who would be happy to accept Bitcoin for purchases if only the prices didn’t swing by sometimes 10% in one hour.
Bitcoin is also notoriously easy to buy but difficult to sell for cash. While millions of people are happy to jump on board and BUY the Bitcoin mania, almost none of them have ever tried to sell Bitcoin for local currency, so they have little idea just how difficult, slow and invasive that process can be.
IMPORTANT NOTE: Do not use Coinbase as your wallet. Instead, download and install your own Bitcoin Core wallet. Coinbase is a dishonest Bitcoin transaction company that seizes Bitcoins by freezing accounts, then makes itself nearly unreachable by account owners to try to resolve issues. Coinbase “eats” your Bitcoins, in other words, locking users out of their accounts and demanding all sorts of personal identification (including social security numbers) when you try to sell.
If I’m reading market indicators correctly, watch for Bitcoin to correct toward US$1,000 over the next several days or weeks. Don’t bet money on my advice, however: I may be under-estimating the depth of irrationality reflected in new Japanese Bitcoin buyers who are jumping on a craze rather than assessing risk vs. reward. Bitcoin might conceivably go considerably higher before the large correction ensues.
Even if Bitcoin suffers a serious correction, it won’t completely lose its value. There is strong support for Bitcoin demand at some level below $1000, especially with many citizens of Japan and China suddenly “discovering” crypto-currency. But even that is a sure sign of an imminent bubble collapse, because once “everyday citizens” start jumping on the bandwagon of any speculative investment — dot-com stocks, tulip bulbs or even Bitcoin — a massive, catastrophic crash is only a matter of time.
One of the best plays right now, in my view, is to convert Bitcoin to other crypto-currencies that haven’t yet been subjected to rapid price increases. Once your crypto-currency is safely stored away elsewhere, wait for the Bitcoin correction, then buy back into Bitcoin after the masses unleash their panic selling.
Better yet, use Bitcoin to buy physical gold if you can find a gold dealer that will accept Bitcoin. Seriously, if you can trade virtual currency for real precious metals, that’s a winning play in nearly every circumstance. I’m not currently aware of anyone who sells gold in exchange for Bitcoin, but you can probably find someone willing to trade almost anything for Bitcoins at LocalBitcoins.com.
Be smart, folks. If you’re sitting on a pile of Bitcoins right now, you may want to diversify into something else for a while and let this current craze settle. Also, don’t forget that the world’s central banks are no doubt buying up large quantities of Bitcoin so that they can unleash a fire sale in an attempt to spur a panic, snowballing selloff. When that day comes, all the panicked sellers who want to get out of Bitcoin will find most of the exits already jammed up (or offline). Don’t be left holding a bag of virtual currency with no exits available as the price plummets by the minute.
Yes, Bitcoin has a strong future, but that doesn’t mean you can’t get hurt in the short term if you’re foolish enough to buy high (irrational exhuberance) and sell low (panic selling). Stay informed about financial risks, market crashes and financial news at RISK.news.