Beware the Bitcoin bulls
For many newbies, the so-called ‘king of crypto’ represents a foreign land they’d like to visit
Bitcoin has been edging close to its all-time high of the $73,750 mark seen in March this year, and for a number of reasons. Its price has been boosted by inflows into exchange-traded funds (ETFs) and speculation about the US Presidential election next week. This latter reason has been nicknamed the Trump Trade, as the former US president has been embracing digital currencies. Yes, he even has a token himself.
The mood is bullish and such euphoria historically attracts a flock of newcomers to the crypto space. More people often invest in Bitcoin when it reaches a new high. This tendency is largely due to the “Fear of Missing Out" (FOMO). When Bitcoin reaches new highs, many investors feel the trend will continue upward and don’t want to miss any potential gains.
This is usually fuelled by media coverage. New highs for Bitcoin attract significant media attention, which raises awareness and attracts new investors who may not have previously considered it.
And then you have the big banks, fund managers and the “institutional investors” who have been jumping onto the crypto train, which can validate its appeal to retail investors like you and me. They don’t just invest, they let you know very loudly what they are doing.
Bitcoin development company MicroStrategy and its founder Michael Saylor is one of the loudest Bitcoin supporters out there. The company recently announced an ambitious plan to raise $42 billion over the next three years to buy more of the world's largest cryptocurrency. That’s a huge amount and really sends a strong signal to investors. Maybe that’s part of the plan.
Beware the Bitcoin bulls
Search online and you will see how bullish some investors get about the future price of the "King of crypto". Some have predicted it will reach $1 million or even higher. While only time will tell, remember, most of the people making these predictions already have skin in the game – they are heavily invested in Bitcoin themselves.
Tell people the price is going to the moon, and they suddenly invest and the price goes up – it’s a self-fulfilling prophesy in many ways. Plus the predictor makes a tidy profit themselves.
Cathie Wood, a well-known fund manager at ARK Invest, has predicted that Bitcoin will reach more than $1 million by 2030, while leading Bitcoin investor Saylor (the MicroStrategy CEO) is equally bullish. Robert Kiyosaki, the author of Rich Dad Poor Dad, predicts $500,000 by 2025 due to the collapse of fiat currencies and increasing inflation.
Some less bullish predictions have been made by the likes of Standard Chartered Bank, which last year forecasted a more modest price of $120,000 by the end of 2024. With Bitcoin’s current price slightly under $73,000, this might seem a little too bullish.
But this is Bitcoin we are talking about here. A digital asset that often surprises people, both on the upside and downside. The wise old investor Warren Buffett famously said “Be fearful when others are greedy, and be greedy when others are fearful.” Whoever you believe, just be careful out there – FOMO can be a dangerous thing.
