Tuesday, February 16, 2021

Bitcoin Is Going to Crash. The Big Question Is When

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 The blowout rally in Bitcoin (CCC:BTC-USD) continues. As I write this, the best-known and most-valuable cryptocurrency trades above $47,000, down modestly from an all-time high set on Thursday morning.


Bitcoin now has roughly tripled since November, and rallied more than 50% this year. And the optimism makes some sense.

Notably, corporations are increasingly comfortable with adopting Bitcoin. BTC saw a big catalyst this week when Tesla (NASDAQ:TSLA) said it would buy $1.5 billion Dollars  of the crypto. The electric vehicle giant follows earlier adopters like MicroStrategy (NASDAQ:MSTR) and payment companies Square (NYSE:SQ) and PayPal (NASDAQ:PYPL).

The run over the last four months continues what has been an incredible rally. Bitcoin only launched in 2009. It cleared $1 (yes, one dollar) for the first time almost exactly a decade ago. Give or take, BTC has appreciated 4,700,000% in ten years. There have been few assets in the history of mankind to show that kind of appreciation. Simply put, Bitcoin has created millionaires.

But the rally hasn’t been without volatility. In fact, volatility and crashes both have been a key part of the Bitcoin experience. Many of those crashes started in environments similar to this one: when all seemed well, and further upside appeared almost guaranteed.

That history suggests another reversal is almost certain to occur. That doesn’t mean investors need to rush to sell their BTC immediately, but at the least they should be on their guard.

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