Boredom Is The Enemy? A Look At Bitcoin Since Peaking At $20,000

The price of bitcoin has dropped 34% in the past three months from above $10,000 to below $7,000. The world’s most valuable cryptocurrency is on track to start 2020 once again down about 65% from its all-time highs hit in December 2017 around $20,000.

The Grayscale Bitcoin Trust GBTC has more than doubled in 2019, but it's limping into 2020 after tumbling 34% in the past three months.

Skeptics Vindicated

After a hit start to 2019, bitcoin prices reached the $13,000 level in early summer before the rally stalled out. The bitcoin bears that predicted the bursting of the bitcoin bubble in 2017 and 2018 have yet to be proven wrong after the 2019 rally ran out of steam well short of previous highs.

Plenty of experts predicted the downfall of bitcoin. Benzinga reported on notable bitcoin bears such as Jamie Dimon (CEO of JPMorgan Chase), Warren Buffett (CEO of Berkshire Hathaway), Mohamed El-Erian (chief economic adviser for Allianz), Robert Shiller (Nobel Prize-winning Yale University economist) and Ray Dalio (founder of Bridgewater Associates) back in 2017.

Boredom Is The Enemy

But perhaps nobody pegged the deflating of the bitcoin bubble quite as well as Jim Angel, professor at Georgetown University School of Business.

In December 2017 near the peak in bitcoin prices, Angel told Benzinga’s PreMarket Prep the bitcoin bubble is unique given bitcoin bulls see the cryptocurrency as a store of value, much like gold. Therefore, their thesis won’t be disproven unless the global economy collapses.

“What makes this one different is very few catalysts for popping the bubble,” Angel said at the time. “During the dot-com bubble, when a dot-com baby came out with a bad earnings report, people realized the business model is broken, and the market responded swiftly and harshly.”

Instead of a mass exodus of bitcoin bulls all at once, Angel said traders would likely slowly lose interest over time.

“My prediction is that eventually boredom is what’s going to cause it to deflate,” Angel said. “Once the people who are rushing in out of fear of missing out, the FOMO, see, ‘Wow, ok I got this thing, now what can I do with it?’ If the price goes nowhere, the speculators are going to say, ‘I’m bored, I’m going to sell it and take whatever profits or losses I have and move on.’ Eventually, I think it will kind of wither away.”

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A Technical Take

Throughout 2018, bitcoin drifted steadily lower via a series of lower peaks and lower troughs as volatility died down, just as Angel predicted. Volatility picked up again in early 2019 before the same pattern of lower peaks and lower toughs once again took hold heading into the end of the year.

But just as Angel predicted, bitcoin bulls are digging in their heels, and the case for buying bitcoin is as strong as ever. In the past three years, the price of bitcoin is up 646% overall compared to just a 42.1% gain by the SPDR S&P 500 ETF Trust SPY.

Benzinga’s Take

If bitcoin bulls want to believe 2017 was more than just a short-term bubble, bitcoin prices will need to get above $20,000 at some point in the future. In the meantime, bitcoin prices need to stay above late 2018 lows of around $3,000 to maintain post-bubble technical support.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.