What Does $40,000 Bitcoin Mean?

Things are about to get stupid. Here's how to stay smart.

Bitcoin yesterday crossed a very important psychological barrier, hitting $40,000 at about 5pm UTC. This means unambiguously that a bull market is on, after less than two years of crypto markets being down or sideways.

That’s right: In the grim darkness of the near future, numbers go up only.

Warhammer $40,000. (Illustration: John Blanche)

Things are going to move extremely fast from here, and in fact Bitcoin shot up another 4% overnight to, at this writing, about $41,500. As Alex Thorn at Galaxy pointed out, this means Bitcoin is up roughly 145% for the year, making it the best performing financial asset at scale anywhere. (To get it out of the way, my BTC price target for this cycle is somewhere around $120,000, probably mid-2025 if not sooner.)

For many who watched crypto intently for the first time from 2020-2022, this is possibly a confusing development. Depending on who you listened to it’s very likely you thought the whole thing was just a bubbly fraud festival that was over and done once Sam Bankman-Fried got convicted. More than a few people’s careers across finance and journalism will be wrecked by this misjudgment, and to them I say, Rest in Piss.

If you want the deep dive into why Bitcoin and crypto aren’t going anywhere, you can read my book, Bitcoin is Magic (You also could have read it two years ago, but I won’t hold that against you).

But in the short term, I’m here today to give you a crash course in the dynamics of the bull market that is about to kick off. I’ve been through four (five?) of these so far, and they all play out in very similar ways.

Here’s a (rough) outline of what we’ll dive into below:

• PRICE: Where we’ve been, and where we go from here (TLDR: BTC $120,000).

• Retail is NOT back yet

• The “cleaning house” thesis

• It’s all about the ETF(s)

• Don’t day trade, you rube

• Interest rates? DON’T MAKE ME LAUGH

• The “real world assets” 2024 narrative (and what’s wrong with it)

• The Bitcoin Halving is NOT priced in (yet)

One disclosure: a bull market means I can keep focusing on this newsletter for a bit longer, because for literally the first time I have a personal stake in a bull run (until CoinDesk, I was prohibited from directly investing in crypto by standard journalistic ethics).

By most standards my stake is pathetic, but keep in mind I’m talking my own (very small) book here.

Welcome to Thunderdome

First, here and elsewhere, the price of Bitcoin (BTC) acts as a proxy for the broader crypto market. Everything follows Bitcoin. That has been changing, and someday soon, when the different applications of different chains become more widely understood, it will entirely end.

But in a bull run situation, when stupidity is dominant, Bitcoin is the proxy for everything.

So, here’s the tale of the tape:

1. In early 2019, Bitcoin bottomed at around $3,400.

2. It bumbled around $10k, more or less, for two years after that.

3. Starting in October of 2020 crypto went parabolic, with BTC ripping from $10k to $60k in around six months (Oct 2021-April 2021).

4. BTC stayed above $40k for one (1) year before the collapses of Luna, Celsius, and 3AC set off a meltdown.

5. Bottom was $16,000 in November of 2022, gradually up for the year since then.

Here’s what that looks like. You’ll notice it looks like we *may* have reached the “parabolic” part of the pattern. But I don’t think so.

We Took Out the Trash (But There’s Always More)

The real parabolic move in Bitcoin always happens when various charlatans and hucksters get hold of the narrative and start selling it heavily to retail. And then there’s a blowup because they were charlatans and hucksters and they overpromised etc.

The story of the last crypto cycle is roughly this: from 2019-2020 fundamental investors cautiously edged back in, while this new thing called “DeFi” came online and started generating big returns through yield farming programs.

A bunch of absolute degenerate reprobates from finance and tech noticed those returns, and starting in late 2020 began hyping up stuff they didn’t understand AT ALL. Sam Bankman-Fried, Alex Mashinsky, Su Zhu and Kyle Davies were ALL from outside crypto. SBF and the Three Arrows boys in particular were basically “technical” traders – the lowest of all financial life-forms – and their total ignorance of crypto fundamentals ultimately led them to commit fraud.

Their fraud, I believe loosely, helped push crypto markets above sustainable levels even of extreme speculation. I mean this not strictly in the mathematical sense that they created fake money from thin air that pumped markets, but in the more holistic sense that their ignorant and motivated bullshitting and marketing effectively tricked people who had no business investing in crypto whatsoever. E.G. the infamous Paul Pierce FTX commercial: “I’m a dingbat and even I can invest in crypto with FTX, you don’t need to know jack shit!”