Bitcoin Price Tipping Point

Bitcoin price bounces from lower high to lower high as the buyers rejoice in their buying opportunity prior to a rally to the moon. The chart has been keeling into decline and the social mood is negative. But buying, at all costs, it seems, is still the norm.

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Bitcoin Price Analysis

Time of analysis: 13h00 UTC

OKCoin BTC/USD 1-Day Chart

Today we consider an article by new-found Bitcoin superbull, Charlie Morris , of MoneyWeek UK.

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Charlie Morris argues that, given the upcoming block reward halving, the only option for speculators is to be long bitcoin, and his conclusion is an hyperbolic buy-buy-buy (exclamation mark).

Hold on. Hold on. Let’s consider the facts.

His article makes a false comparison and the author proclaims the erroneous conception that:

“The more people who use it, the more valuable it becomes.”

This is the same “myth dream” that informs efforts such as ClassicCoin, an age-old manifestation of human society’s propensity for Cargo Cultism . The reasoning, based on the assumption that more adoption equals more value (cargo) delivery, has led people, throughout history, to engage in elaborate projects to pave the way for greater adoption.

The More People Who Drink Water…

The misguided belief’s logic-chain is that:

1) an infrastructure increase will increase adoption, and that
2) greater adoption will increase value

On the surface it seems logical, but strangely, it is not objectively true in any market, at any time in history. The inversion where it IS true, of course, is the well-known Ponzi scheme where the false logic is flim-flammed by trust, exuberance and greed.

Greater adoption does not equate to an increase in price, and the reason is because there is an age old fundamental disconnect between value, on the one hand, and price, on the other.

How Valuable Is Water For Life?

The Bitcoin network has value based on its degree of decentralization and ongoing observance of the Rule of Consensus.

Hypothetically, if there were to be a global reshuffle due to, say, a large blocksize increase that left us with only 3 large miners, or a single mining pool, then Bitcoin would essentially be worthless because it would be so centralized as to have lost all meaning.

Practically, Craig Wright is talking about 300GB+ blocks in his ideal version of Bitcoin. This matches Andresen’s schedule of block size growth.

How Much For A Watermelon?

The bitcoin price chart, on the other hand, is an unregulated open market where anyone can do anything. The exchanges do insider trading, and large speculators – investment funds and shadow banks – speculate and hedge vast positions that the lapdog exchanges neither can, nor have to disclose.

Put that through Yoda’s brain connector for yourself. Try Pantera Capital, for example.

November 2015 Was The Rally

Yes, the block reward halving will raise the base price, but buying into the expectation two months before the fact is naive, and ostrich-like, ignores the way this chart (and other commodities) have historically moved.

Commodities (including bitcoin) typically start a rally from a decisive low – not from a 6 month strain against resistance ($470). Don’t trust me on that – have a look at the historic bitcoin chart.

Summary

Bitcoin price is teetering into decline as retailers optimistically keep “buying the dip”. It will be interesting to hear from the bulls – What is driving your engine? Is now the right time to buy? To what price target are you buying to?

Bitfinex Depth Chart and Buy/Sell Volume

Click here for the CCN.LA interactive bitcoin-price chart.

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