Bitcoin’s Parabolic Move Shows Why It’s a Sucker’s Bet

Bitcoin has been on a tear lately, exploding from $3,000 to over $13,850.While pundits try and ascribe reasons for the move, bitcoin traders who have managed to ride the wave are cheering.

For now.

If anything, this wacky move only serves to support the long-term bearish argument on bitcoin.

What Goes Up…

One of my primary objections to holding, or even trading, bitcoin is its volatility.

Most of the time, when a stock is riding a wave higher, there’s a reason for it.

Not so with BTC. It moves for one reason: emotion.

As an investment commodity with no hard asset behind it, its value in any given moment is dependent on what one trader thinks another trader thinks bitcoin is worth, who depends on what he thinks another trader thinks bitcoin is worth, and so on.

Pure speculation.

Liquidity Crunch = Death

So why is anybody surprised that the bitcoin price crashed from its $13,880 high to $11,826 in just 15 minutes on Wednesday?  That’s a 15 percent decline in just 15 minutes.

In the stock market, and most other markets with high degrees of liquidity, transactions take seconds. Gains or losses can be booked very quickly. Stop losses can be set.  They may get blown through, but at least if you want to sell, you’ll be able to.

Bitcoin transactions can take minutes; and if it takes 15 minutes, you are seriously screwed – especially in a market like this where the whales are cashing in before you can.

It gets worse. Coinbase crashed today because of all the traffic. All those mega-profits might be vanishing before your eyes. If you entered late, thought the BTC price would go to $20,000 and see it crashing – and you are locked out – are you still a bitcoin bull?

A “Store of Value” Has One Job…and Bitcoin Fails

All this talk of bitcoin being a “store of value” is nonsense.  It’s a con game.

A store of value has one job – store value.

When that value fluctuates as wildly as the BTC price, especially in just a few minutes, it doesn’t store anything other than trader anxiety.

Why?  Once again, it’s because bitcoin isn’t anything other than vapor, entirely speculative, and dependent on multiple derivatives of expectations

If you insist on trading bitcoin, at least do it like the smart money whales do, or at least try and find a hedge.