Look, everyone wants to talk about Bitcoin, especially with the kind of volatility we’ve been seeing lately. It seems like you’ve only got two types of people in this space: the ones who think it’s going to zero and the ones who think it’s going to a million. The truth is, it’s most likely going to be somewhere in the middle.

To the “zero” people: you can’t tell me an asset has no value just because it isn’t a payment system. Gold hasn’t been a form of exchange for a long time, yet it’s been a store of wealth for thousands of years and just hit all-time highs. And to the “million” people: if you do the math, Bitcoin hitting a million would require a massive portion of the entire planet’s money supply. It’s an exaggerative way of thinking that just seems silly to me.

The reality is that Bitcoin is maturing. The early days—when it was risky and hard to settle—that’s when you got those humongous returns. Now we have ETFs. When an asset matures, the returns naturally go down.

The Message in the Tape

We saw Bitcoin lose about 50% of its value in just a few months, and there’s a huge lesson to be learned there. It all started around October 10th when the market got hit hard and nobody knew why.

When a market does something totally unexpected and there’s no explanation for it, you have to get out of the way. If there’s bad news and a market goes down, you can explain it—usually, the news eventually stops being bad and it goes back up. But Bitcoin kept going down even while gold, silver, and stocks were hitting all-time highs. That’s a “tell”. It’s like a poker player raising into a strong hand on the table—he might be bluffing, but chances are he’s got a better hand than you.

The Danger of the “Genius” Ego

One of the most dangerous things in this game is listening to people who are “perma-anything” or who think they know exactly what the future holds. Nobody knows where Bitcoin is going.

I saw this in ’08—people who were short and made millions suddenly became heroes. Their egos blew up, they decided they couldn’t be wrong, and they stayed bearish while the market ripped higher, eventually giving all their money back and then some. We see the same thing with Bitcoin bulls who made money on the way up. Now that it’s going down, they just keep shouting “buy, buy, buy” because they were right before and think they can’t be wrong now. That’s a dangerous place to be.

Wait for Confirmation

There are no guarantees in this game. Since October, the tape has been telling you that Bitcoin is bad. The correlations have broken, and even with “positive” news, the asset has continued to trade like crap.

If you love Bitcoin and want to be long, fine—but wait for the tape to get better first. Let the market confirm your idea. It isn’t going to suddenly open at $250,000 tomorrow; if it’s truly going to a million, you’ll have plenty of time to catch the move.

If Bitcoin is going to make a massive run, the first thing it has to do is start outperforming other risk assets. Until it does that, don’t fight the tape. Markets are discounting mechanisms—they bottom on bad news and top on good news. We find out the “why” much later.

The lesson is simple:

  1. Don’t fight the tape.
  2. Let the market confirm the trade to you.

We’ll keep monitoring it, and hopefully, we can catch it when it starts to outperform unexpectedly so we can get in nice and cheap.