Enjoying the bitcoin disbelief rally in the last two weeks? Enjoy it while you can because exponentially strong moves like this tend to typically fall hard. We are seeing the first consequences in the last 24 hours. The leading cryptocurrency was up by more than 40 percent in one week, and nothing about this ascent screams sustainability. Bitwise Asset Management CEO Hunter Horsley echoes this sentiment.
On June 26, the top honcho of the crypto asset management firm took to Twitter to express his concern over bitcoin’s parabolic rise. He said that while a strong monthly performance is positive for crypto, a 40 percent move in one week is negative for the space. He provided three reasons why:
- Naysayers use it as a sign of a bubble
- Regulators get anxious about the possibility of hurting retail investors
- Professional investors worry that they might be accused of bandwagoning
Hunter Horsley explained why bitcoin’s current move is not good:
Strong monthly performance is good for crypto.
40% move in a week is bad for crypto.
Detractors use as evidence of bubble, regulators get nervous about harm, & professional investors—already interested—worry they'll now be accused of bandwagoning.
Slow & steady wins the race
— Hunter Horsley (@HHorsley) June 26, 2019
Let's look at these reasons closely and explore why a 40% move in one week is bad for the entire cryptocurrency market.
Detractors Love to Scream Bubble
Almost every bitcoin parabolic move has been likened to the tulip mania of 1636. Critics of the cryptocurrency hate it when bitcoin outperforms every asset in the world. Thus, they find fault when they can and it appears that the crypto token’s greatest strength is also its kryptonite.
Since 2012, every bitcoin bull market has been parabolic in nature. In other words, bitcoin rises steeply with very little correction or consolidation. The extreme bullishness is why detractors claim that bitcoin bull markets are nothing but bubbles.
The over-40-percent move this week is giving naysayers ammunition to scare both institutional and retail investors. If you don’t understand bitcoin, you might be easily swayed that it’s nothing but a bubble that can pop anytime.
Regulators Get Spooked
Big 40 percent moves in one week rarely happen in mature and regulated assets such as stocks, commodities, and bonds. That’s why when an unregulated asset like bitcoin pulls off a mega rally, it terrifies regulators. They see an immature and likely manipulated market.
It also doesn’t help that only 116 wallet addresses hold 10,000 or more BTC.
With current conditions, it’s no wonder that regulators keep delaying the decision on the issue of a bitcoin exchange-traded fund (ETF).
Professional Investors Don’t Want Bandwagon Accusations
Pro investors are supposed to find the next big thing for their clients. They spent countless hours of research to find a golden opportunity before everyone else does. Recently, many got rich because of the boom in the marijuana industry. Sooner or later, there will be another gold rush.
While bitcoin presents this chance, no one in the conference room would want to hear “cryptocurrency” after bitcoin’s monumental ascent. These investors want to get in early, and a 40 percent move in seven days doesn’t fall under that definition. Those who mention the digital asset might be ostracized for not doing their jobs and simply hopping on the bandwagon like a newbie retail investor.
Overall, an impulsive 40 percent move in one week is bad for the entire crypto market. Hunter Horsley elegantly provided the reasons why in a single tweet. It gives critics ammunition, scares regulators, and discourages professional investors. What might be better is a cryptocurrency market that gives time for correction and consolidation. As Horsley said, “slow and steady wins the race.”