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Why the bitcoin mania is a blinding red flashing light signaling the end of a grand cycle

SPX News by Allie Longford on 13:45 January 16, 2018 EST


Airtime, articles and endless gigabytes are being dedicated to Bitcoin and all its siblings in the cryptosphere over the last few months. It is only fair, the first digital currency worth next to nothing just a few years ago traded briefly above $20,000 shortly after its first derivate started to trade in the Chicago Mercantile Exchange at the end of 2017.

The media is focusing on the extraordinary hype around the hottest topic in finance and the internet and, in turn, creating more hype in a vicious cycle. There are even some TV programs aimed at retail investors featuring TV presenters with apparent "issues" that dedicate half of each and every episode to cheerlead crypto currencies and encourage their viewers into the slaughter house or to becoming almost-instant millionaires with this one weird trick, depending on your view on the matter.

But Bitcoin is signalling something even more important than an intangible single currency being valued more than the annual salaries of millions of Americans.

Let's rewind to shortly after whatever your preferred financial crisis in history is. What happened during those moments of panic and desbilief following a good old crash?

When the mood is ultra negative, when people fear for their jobs, homes and wealth they hoard and preserve whatever they have left. People cling on to their assets and cash protecting them at all cost. They won't incur in unnecessary expenditure and they will be severely adverse to investing whatever they own as they perceive that an investment could go belly up and lose whatever they risk.

But, what is the opposite scenario? Take now your preferred moment of economic euphoria in modern times. People happy to splash their hard earn cash, they will be eager to take their wealth out of the haven an venture into investments in the quest for a higher yield by accepting higher risk. But at least in the last crash people decided to invest in overvalued but tangible, always needed albeit overpriced, property.

As the economic cycle turns from negative to neutral and then to positive we all become more enthusiastic, our fears reduce and the due diligence on choosing investments becomes more loose. It does not matter if whatever the investment is is not completely understood or quite risky -like complex derivates in 2007-. As long as the returns keep rolling it's all good.

And, back to present times, the times where mum and pop are investing in cryptos not knowing what exactly they are or how they work, not knowing how an objective valuation can be made, ignoring that the supply of cryptocurrencies increases every day, not wanting to know about crypto theft and how wallets have been cleaned up in multiple ocasions. The cryptos they obtained in exchange for their hard earned cash are backed by absolutely nothing unlike conventional currencies, backed by estates their assets and their armies as Sadam Hussein or Gadafi would tell you if they could.

It is clear to see that we are in the last part of an economic cycle, in the euphoria phase, the moment when risk does not matter and money is literally exchanged for nothing. Cryptocurrencies have earned their media hype, however media is ignoring the bigger picture and what this event is signalling. Cryptos are still high and the stock market is making new records every single day. But it is only a question of time and it won't be long till this changes. Buckle up.



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