Like Charlie and Grandpa Joe after one too many Fizzy Lifting Drinks, bitcoin had been lazily bumping up against its all-time high of just under $20,000 for the past month or so. But on Wednesday, it finally broke through that elusive barrier.
While #bitcoin Twitter erupted with “I told you so’s,” for others, the milestone brought back memories of late 2017 when you couldn’t walk through a college dorm without overhearing someone say, “I’m telling you bro, it’s going to the moon!” But beyond trading at a similar price, not much of the current activity around bitcoin resembles that other period of cryptomania. Here’s what’s different this time around.
Investors have wisened up on altcoins
Rewind to 2017. Snap had just popped 58% after going public and Initial Coin Offerings (ICOs) were more popular than getting a lip tattoo over spring break. Pretty much anyone with a white paper and a punny idea for a name could list a digital coin and potentially dupe investors.
- One example: Hyped venture Benebit said it was building a unified customer loyalty system based on the blockchain. Instead, it pulled off one of the biggest exit scams in crypto history, making off with up to $4 million.
Inexperienced investors getting burned by altcoins (aka cryptocurrencies that aren’t bitcoin) is a familiar story. In October 2018, a study from EY discovered that 86% of 2017’s leading ICOs were trading below their listing price, while 30% had essentially lost all their value.
Things are different now. Bitcoin’s market dominance, or its value relative to that of the rest of the crypto market, is almost double its 2018 low when ICOs were the cool new kid at the lunch table. That’s because bitcoin isn’t being used as an intermediary to move capital into other “shitcoins.” The money that comes in is kicking its feet up and staying awhile.
Accumulation is the name of the game
Around 62% of bitcoin in circulation hasn’t changed hands in over a year, a sign that fewer people are actively trading bitcoin, and more are holding onto it (HODL, if you will). This makeover from volatile collectors’ item → store of value has given rise to a new wave of consumer products designed to help newcoiners build stakes in bitcoin.
- Startups like Ryze and Swan help users accumulate bitcoin at regular intervals regardless of price, a classic investing strategy known as dollar-cost averaging (DCA). And fintech giant Square’s Cash App earned almost 80% of its total Q3 revenue from bitcoin-related transactions.
Ryze cofounder Abhay Aluri thinks macroeconomic trends have led to a shift in mindset. “People are accumulating bitcoin in an inflationary environment because it’s the antithesis of money printing: sound money with a fixed supply, that nobody controls,” Aluri told me.
Institutional investors have entered the chat
In 2017, JPMorgan CEO Jamie Dimon called bitcoin a fraud and a bubble: “It’s worse than tulip bulbs. It won’t end well.” Fast forward to December of this year, and JPMorgan strategists say that bitcoin’s intrinsic value is set to rise “significantly” in the coming months. JPMorgan’s 180 speaks to the broader stamp of approval institutional investors have given bitcoin.
- Fidelity, which manages over $3.3 trillion in assets, launched a bitcoin fund this year.
- PayPal also allowed its 346 million global users to buy and sell cryptocurrencies directly through their PayPal accounts this year.
- And publicly traded companies like Square and MicroStrategy have moved portions of their cash reserves into bitcoin.
Searches for keyword “Bitcoin” via Google Trends
Zoom out: A look at Google search data indicates interest by individual investors is far lower than it was in 2017. That’s because bitcoin’s latest bull run could be powered more by Goliath than David.