Bitcoin: Prepare For The Reckoning

Be cautious around people who tell you that this time is different, and bitcoin will never experience another bear market.

One day, the current cycle will end, and holders will start selling BTC for USD again.

First things first. We at REX Wire are colossal Bitcoin bulls. We believe in the technology, we believe in the need for sound money, and we believe in the use case for bitcoin as an asset of fixed and known supply that stands outside of TradFi's infrastructure.

But we also know human nature and we understand the anatomy of a market cycle. So while it might seem premature to raise this point, not doing so risks taking huge losses in the future.

Wall Street Cheat Sheet and Bitcoin cycle (r/bitcoin)
We've been here before. We'll be here again.

This Time Is Not Different

"But this time it's different" is one of the rallying cries of the permabull. The argument is that some factor (e.g. ETFs) have fundamentally changed the game, meaning that bitcoin (or some other asset) no longer acts in the same way as every other market that has ever existed.

Finance 101: Templeton’s 16 Rules For Investing
John Templeton was one of the 20th century’s most successful investors.

All markets breathe. They ebb and flow. They are all powered by human psychology: Fear and Greed. There are always cycles.

And that means, as bullish as things seem right now, that sooner or later, the party will come to an end. Not yet, and potentially not for many months, but there is no question about this in our minds. No matter how high the price rises, the bull market will one day give way to the bear once again.

The temptation is to get suckered into the emotion of a market. When the bull is in town and bitcoin is soaring, it feels like it can never fall. Influencers come out of the woodwork, giving ever more outlandish predictions. $250,000, $500,000, $1 million BTC within two years.

If you've been around for a couple of market cycles, or more, you'll recognize this. It's characteristic not just of Bitcoin, but every market that has ever existed.

ETFs: Game-Changing, But Not Changing The Game

ETFs are a huge development for Bitcoin. They open the way to hundreds of billions of dollars of institutional capital. At a time when inflation is still a serious threat, such a store of value is highly attractive to TradFi investors.

ETFs are game-changing. They introduce new liquidity and characters into the market. But don't be fooled: It's still the same game, albeit with new participants.

But when all the money has flowed in that there is to flow, what happens? TradFi traders are, at heart, no different to crypto's degens. There have been plenty of bubbles and busts throughout history, long before crypto. The introduction of new retail and institutional money just means this bubble will be bigger than the last.

We're Not There Yet

It could be many months, possibly even a couple of years, before the market tops out and the next Crypto Winter sets in. Standard Bitcoin cycles are (as everyone knows) around four years long—or at least, they have been so far. If this cycle plays out like others, the peak will come around the end of 2025. But that's not set in stone, and the more people assume it will happen that way, the less likely it is (since traders will front-run that assumption in one way or another).

Either way, we aren't seeing the FOMO and wild excesses that characterized previous bitcoin tops. Celebrities aren't endorsing shady exchanges at the rate they were in 2021, for example. At the Superbowl yesterday, there were no crypto ads. It's still early.

And so this market could still have a long way to run. We won't make a prediction about where the top might come, or when: Ultimately, anyone who tells you they know how the market is going to act does not understand how markets work.

All we'll say is that there will be a top and a new bear market in due course. There will be signs when it's about to happen, but at the time, it will feel like the last thing possible.

That's when there will be maximum FOMO. And that's when to be most careful.

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