Bitcoin prediction expert Vinny Lingham: Bitcoin ETF may cause another Bitcoin bubble, and it is not appropriate to approve it now

Contrary to popular belief, I have not always cheered for the rise in Bitcoin’s value! I have also implicitly expressed my views on Bitcoin’s unstable value and irregular openings in public.

When I originally wanted to write this article, I wanted to focus on why I thought the Bitcoin ETF being reviewed by the SEC was not a good thing for Bitcoin (I will explain the situation later in this article). Because I quickly realized that there was a bigger problem here - another Bitcoin bubble might be coming!

An unknown writer published an article on Gizmodo on Friday about Bitcoin's recent record highs, while pondering why Bitcoin hasn't died yet. This straightforward view actually represents the confusion of most people, why Bitcoin didn't "die" after plummeting from a high of about $1,200 to about $180 in 2013. It also reminds me of the days after 2000, when many people declared that the Internet was no longer working. Do you remember those days?

I don’t intend to focus on the history of Bitcoin’s rise and fall in this article, as it has been well summarized in the previous article. If you are not familiar with Bitcoin’s history, you can do some research on your own before continuing to read the context.

After the 2013 crash, it took Bitcoin about three years to recover from the ups and downs — largely due to media-driven and economic downturns such as MtGox (and other market crashes) and a series of negative “situations”, including Craig Wright’s claim to be Satoshi Nakamoto, Mike Hearn’s negative impact of Bitcoin’s death and the block size debate.

Now, I need to offer a warning about the risks of price appreciation too quickly. Yes, Bitcoin is scarce and valuable, which will inevitably lead to continued price appreciation, but if the increase happens too quickly, we will go from boom to bust. This is indeed not an ideal situation if we want Bitcoin to move from a commodity to a store of value.

This means Bitcoin will become boring again and will have to move from being a digital commodity to a store of value (which by definition means low volatility) and eventually a digital currency. Every time we go into a boom/bust cycle, it takes a long time to get back to normal.

We are in a cyclical process, and if (when) Bitcoin breaks $1,300 — it could send the price of Bitcoin to new highs very quickly. My expectation is that Bitcoin will not break $1,300 by March 11 (the date before the final approval of the Bitcoin ETF). But it will still rise towards this target. But I don't expect it to do so unless someone has inside information about the ETF and starts buying a lot before the SEC announces it.

I hope this article will serve as a warning to those who think Bitcoin will rise to its peak again. $1,300 is a major psychological price threshold. It can be said that no one thinks that Bitcoin will create a "bubble" below this price. Of course, some people may have sold their Bitcoin at a loss. But overall, people who did not believe in Bitcoin before are now starting to believe in it again. And this is the danger.

There is a lot of hype and expectation surrounding the upcoming Bitcoin ETF. Some predict that it will bring up to $300 million in new money into the Bitcoin ecosystem (at current values, $60 million worth of new coins are mined each month), forcing the price up. Many "experts" have already claimed that this is not the true value of the currency's price, and they are wrong! The odds of this happening are still very high, and I will explain it briefly and clearly.

My view is that if the ETF is successful, the reasonable range for the current Bitcoin price to rise should be $100-150 (the success rate of ETF approval is about 10%-15%). If the ETF is rejected on March 11, the price of the currency may fall by $150. If this happens, it will definitely be a very good buying opportunity.

If this is approved, it will trigger a massive bull run similar to the previous one, which would mean that a second ETF may also be approved on March 31st.

The reason why the price of Bitcoin is not above $2,000 right now is because the probability of the first Bitcoin ETF being approved is actually very low.

If it is approved, you can imagine that the price of Bitcoin will hit the $2,000 mark in a few weeks/days, and the possibility of falling below $1,300 is basically quite low. This will also start a new round of price fluctuations.

This shows that Bitcoin price fluctuations are market risks. If the ETF is approved, the risk may be around 15%, and the price may fluctuate between +1000/-150.

I don't care if external factors, like a Bitcoin ETF being approved, push Bitcoin to $2,150 or whatever, but if that goes well and Bitcoin moves into the $3,000 mark due to mania/short squeeze/media orientation/social control and other tipping points, that would be a wake-up call to me and a lot of smart money would get out because the bubble is starting.

There are many strange cases in the world of Bitcoin. Here are a few simple examples, such as

1. Full Moon (they firmly believe that the price of Bitcoin will reach the moon)

2. Manic Volatility (Buy Buy Buy/Sell Sell Sell)

3. Hoarders (aka hoarders/buy and forget about)

4. Speculative/Day Trading (Frequent Buying and Selling – Trader Type)

5. Professional investors (who hold long-term views and buy or sell when things change)

The archetypes of all the examples above like to see prices only go up and never down, completely ignoring how these affect the Bitcoin economy, the network, and even the public's perception and acceptance of Bitcoin. The speculative and manic types particularly like volatility, while the full moon and hoarding types don't care - they just want to see new mining pools.

So the real problem is the professional investors who slowly seep into the system. There have been a lot of professional investors who bought in at prices below $1,000 over the past year . The expectation is very high that Bitcoin will break $2,000 this year, and my expectation is that Bitcoin will break $3,000 this year - but preferably later this year. Because if it goes up too fast - the professionals will leave - they will choose to withdraw their funds and wait for a good time to buy back in. This is part of the cycle that triggers the Great Depression.

Supply and demand will eventually find a balance point, but if professional investment leaves the market, the ETF requirement itself is a challenge for Bitcoin. The existence of professional investment means that the price of Bitcoin will remain at a relatively stable level. These special high-net-worth individual buyers conduct over-the-counter transactions but keep their Bitcoin away from the market. In doing so, they hinder market supply and ensure that their new funds and new Bitcoins can have an equilibrium value point with minimal fluctuations.

Here are the reasons why (and I’m going to keep this short for the sake of length) I believe that the upcoming ETF approval is not in the best interest of Bitcoin (it would likely also lead to another boom/bust cycle), and if they do approve it, the SEC would be derelict in its duty to protect the public.

1. The block size debate is not resolved yet, so we should not allow unsophisticated investors to invest in a product that can destroy market value overnight. I will further explain this in other articles, but IMHO hard forks are terrible for Bitcoin. The new draft amendments have not been made public, and I don’t think they can accurately indicate the series of problems that will occur.

2. Investors entering the ETF on a given day may experience market volatility - depending on who has access to supply/demand data and the source of the Bitcoin - which may lead to potential market and price manipulation risks.

3. For market manipulation - it is easy to create market sentiment and induce retail investors to buy Bitcoin on a large scale through ETFs. Imagine what was said in the movie "The Wolf of Wall Street". Retailers and unsophisticated investors have nowhere to buy Bitcoin now because Bitcoin is too volatile and too complicated. In the field of cryptocurrency, it is normal to evaporate 15%-20% of the value in a day - excluding those who have retirement savings. So it is a good thing that Bitcoin is difficult to buy at this stage. After all, it is generally a complex portfolio investment (although it looks a bit like a 3M scam).

4. I don't believe Bitcoin has enough market cap to support $300 million worth of direct demand from retailers or corporate investors. Bitcoin works when the price rises slowly and people can hold and sell at will. $300 million in demand will encourage more people to get into Bitcoin and keep the price going up. One day the ETF will be cut in half because people are scared. Bitcoin will be most valuable when it is held by a large number of people, rather than being highly concentrated in one or two ETFs that have to be forced to sell it and people make margin calls every time there is instability in the price of Bitcoin. You think you see the volatility in the price of Bitcoin - but honey, the fun is yet to come!

5. Many people have analyzed how ETFs have been able to have such great success in opening up markets. Let’s not forget that they have also had great failures, but still many people are paying attention to them. Given that Bitcoin has a small market cap compared to gold, it is more susceptible to market manipulation, losses, and worse consequences. And these are not risks that Bitcoin needs.

6. The opposite view is that the openness of the ETF market attracts more new people to the Bitcoin community. ETF investment is a virtual metric. Who cares if thousands of uninformed people buy Bitcoin and are willing to sell if Bitcoin drops 15-20%? This is not the way to really promote Bitcoin, we need to proceed steadily. It is better for everyone to open an account at Coinbase and take the time to learn about Bitcoin.

7. I would actually prefer to have Bitcoin mining pool companies and mining hardware manufacturers list their stocks on exchanges. Civic is a company building decentralized digital identities on the blockchain - we are preparing to go public (starting now!) and we will definitely do so, but I believe there are more public companies in the Bitcoin/blockchain space. Investors can get exposure to the Bitcoin ecosystem without having to worry about the underlying asset and the pullback in the value of the asset.

8. The irony of ETFs is simply that Bitcoin was designed to be a distributed value and currency storage system, but ETFs are a legacy of the old world, and now we are all rushing into the market to create centralized Bitcoin funds. We have just experienced the sharp fluctuations in the Chinese market and the phenomenon of market deleveraging - but if you create a central storage institution that stores several or even hundreds of thousands of Bitcoins, this will bring this risk back into the market. Some traders have appeared in the market again through leverage and long-selling ETFs.

9. The real role of the US stock exchange is to protect the public. I don’t think it’s a good idea to allow an ETF to keep Bitcoin going higher, especially given the risks Bitcoin still faces. If the US stock exchange allows this policy this year, we’re in for a roller coaster ride!

10. There have been many studies showing that gold ETFs increase gold volatility - volatility is already enough for Bitcoin...

I have elaborated on my point of view. Bitcoin price volatility is bad, and stability is good. What Bitcoin needs is slow and sustainable growth in order to decentralize the control of Bitcoin, rather than rapid and unsustainable growth by taking advantage of the centralized control of Bitcoin by the bankers. If you don't think so, then you are not considering the long-term interests of Bitcoin. If you just want to make a quick buck, then ETF is a good choice!

In conclusion, I am not against the idea of ​​an ETF - I think it would be a good thing, but I do not believe 2017 is the year for it. Once Bitcoin prices get into the $30,000-50,000 range (expected to happen around the next year) and volatility continues to decline, then I believe we can get it to retail and investors - but for now, I hope we can avoid the next Bitcoin bubble!