This Time Is [Not] Different

It's already different, but the entry of big money won't change fundamental realities like herd mentality.

How is this cycle different?

"This time it's different." It's the thinking that destroys portfolios and leaves markets littered with the corpses of failed traders. At the same time, not every crypto market cycle is the same. And this one, it has to be said, certainly doesn't look like previous ones.

This time is different. But at the same time, it's not different. A key task for this market cycle is to figure out the different ways in which it's different, and the ways in which it's not.

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

1) It's Different

The arrival of ETFs is a game-changer. For the first time, ever, institutional and retail money has an easy on-ramp to bitcoin, with BlackRock et al going strong on the marketing. Boomers get to buy magical internet money. The last week has shown what the effect of that can be, as massive demand is channeled into the underlying spot market.

This cycle has progressed much, much faster than previous ones. Bitcoin has broken key technical levels (e.g. the 0.618 fib) before the Halving for the first time. It's easily on track to pass its all-time high before the Halving. It typically takes two years from the bottom of the previous bear market to get back to the highs; it's been 16 months this time.

So this time is different. A massive influx of new money means big and fast price appreciation. This cycle won't be like the previous ones. There are at least three possible scenarios for how it might play out:

  • "Left translated" cycle. This would see the market getting overheated well before the end of the traditional four-year cycle. The result would be an early peak, possibly somewhere in the $120-220k region, and a longer bear market. Given the price action, this is now being discussed as a distinct possibility for this cycle.
  • "Super cycle". An alternative is that bitcoin continues to show strength throughout the span of the cycle, peaking towards the end of 2025 at a greater multiple than the last bull market. Instead of diminishing returns compared to the last cycle, targets like $500,000 could come into play.
  • Double-peak cycle. Another variation is a cycle with an early peak, like 2013, followed by a crash or consolidation, before another larger peak anything up to a year later.
What Is A Left-Translated Bitcoin Market Cycle?
It’s possible that a flood of institutional capital could push BTC to an early cycle high.

Any of these are possible, or other scenarios like a lengthened cycle. What we do know for sure is that it won't be like 2017-2021, because it's already different.

2) It's Not Different

Then there's the other side of all this. Human nature hasn't changed. Financial bubbles occur in every market of every size. Greedy and unprepared latecomers will lose money. Disciplined and professional traders will win.

Even if Bitcoin is a new monetary paradigm, its value won't go up in a straight line forever. And even vast sums of money and BlackRock's blessing won't prevent a reckoning; look at the dotcom crash, when $5 trillion in value was wiped off tech stocks.

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.

We can expect something similar in the later stages of this cycle, whenever that happens. If and when it does, it's worth remembering that this is not abnormal. In fact, it's just the way that new technologies and popular products tend to gain adoption. The internet didn't disappear after the dotcom bust. Today, the Nasdaq is trading at 3.5x its March 2000 peak, and almost 20x its post-crash lows. Sound familiar?

Dominic Frisby has a great take on bubbles, and the purpose they serve in accelerating adoption and establishing new norms. (Holland, for example, has been the center of the flower-growing industry for 400 years.)

So, this time is different, and it's going to be fantastic. But certain constants like herd mentality don't change, ever. We can't even say that's good or bad. It just is, and it's far better to be aware of it than not.

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