Back in the late 90's a tech company emerged on the scene that was going to change the world.
They were going to make all other brick and mortar retail stores obsolete by using this new technology called the internet to reach buyers and sellers everywhere.
Even from the comfort of their own living room!
For this reason, the stock shot up.
Climbing higher and higher and higher.
Starting from a base around $3-$5 in 1998, climbing all the way to over $110 in 1999.
(Source:
)https://twitter.com/crypto_rand/status/964436734477066242
- crypto_rand
All this because it was based on an exciting new technology that promised to change the way we do... just about everything.
After the excitement wore off, and it was realized that it would still take years before this new technology was able to be used the way many envisioned, the price of the stock plummeted.
I think it sounds very familiar.
Bitcoin is not Amazon in any way shape or form. They are completely different things, that is not what I am trying to compare here.
I am trying to compare the psychology and sentiment that often surrounds new technological innovations and the effects it has on prices.
Both Bitcoin and Amazon are/were based on an exciting new technology that hopes to disrupt just about everything we do.
For that reason prices shot way up, and are/were currently very much in "bubble territory".
That sounds very much like what is going on with Bitcoin today.
Yes the technology is revolutionary, yes the potential is there, yes it solves a lot of problems, however the technology is still not there for real utility beyond a digital store of value, YET.
At some point there is likely to be a reckoning that takes prices way down.
Not just of bitcoin, but prices across the board.
I am not sure what will be the trigger, but if history is any indicator, this is something that should be expected as new technology often goes through boom and bust cycles much like what we saw with Amazon.
Prices tend to get way ahead of themselves as people think of all the possible applications only to see prices eventually be reigned back in to better align with reality. Then, eventually, the real technological innovations emerge and much more accurate pricing results.
If the past is any indicator, we could see Bitcoin still make two new highs before this price reckoning takes place.
This is a chart of the Bitcoin price action overlayed on the Amazon chart from the late 90's:
(Source:
)https://twitter.com/business/status/963554149366460417
- business
Not saying that prices will follow exactly this pattern, but there is the possibility.
Again, I would like to make this clear, I am not comparing Bitcoin to Amazon per say, I am comparing similar price action, psychology, and sentiment within a new technological innovation.
What is being compared is not as important as the psychological component that is reflected in terms of price on the charts.
There is likely to be a major price reckoning coming, probably even greater than what we have seen thus far.
If you are sitting on healthy profits, don't be afraid to take some along the way so that you can buy back in when things aren't looking so hot.
Don't be the guy that sells AFTER prices are already down 95%.
If history unfolds in a similar fashion, we could still see two new highs on Bitcoin before this happens.
And finally, and most importantly...
Stay informed my friends.
Follow me: @jrcornel
