Chart of the Week - Bitcoin Tipping Point or Tripping Point?
I’ve previously mentioned that Bitcoin trades basically like a risk-asset — riding waves of liquidity and speculation.
The correlation data largely confirms this, and indicators of risk taking and sentiment show similar behavior among investors in bitcoin vs tech stocks.
This week’s chart arguably adds weight to that idea. It’s part of a growing collection of charts showing increasing extremes of greed, risk-seeking, and speculation across markets (especially centered on tech stocks: which Bitcoin correlates closely with).
But there is a big open question here: is this a sign of an imminent peak in Bitcoin/crypto? (and risk assets in general, including increasingly frothy tech/AI stocks) …a “tripping point“ if you would: i.e. a point of vulnerability where it’s only a matter of time before the market trips and falls down into corrective mode.
OR — is it actually a sign of a *tipping point? A phase of rapid adoption where Bitcoin is making its way into the mainstream; where progress comes slowly at first and then all of a sudden…
From a market cycle and investor psychology standpoint this would be akin to the FOMO stage of the market cycle where you see the masses rushing into the market, where it’s increasingly accepted and acceptable to get involved.
It’s an interesting pair of questions, because you can probably actually answer yes to both of them, and it echoes some of what I discussed about tech stock valuations in last week’s ChartStorm.
>> i.e. even as tech stocks reach extreme expensive levels, the strong earnings trends provide some fundamental justification, and speculative manias can run further, faster, for longer than you expect.
And here’s the thing, even if you don’t follow Bitcoin/crypto, and have no intention to ever touch it, the fact is by this point it’s probably going to touch you either way — in other words, as a barometer of risk appetite and speculation, as a risk asset itself, and being closely correlated with tech stocks: if Bitcoin goes, tech probably goes too (and the rest of the stockmarket for that matter!).
So it’s an interesting chart with interesting implications for investors…
Key point: A mass adoption/speculation phase appears to be taking place as more and more investors make allocations into Bitcoin/crypto.
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