The eight phases to total Bitcoin domination

See the latest Australian dollar analysis here:

Australian dollar cracks 13 month low

It doesn’t really matter what the bubble is. If it is a genuine bubble then the path is always the same.

  1. First, some “genius” delivers a breakthrough product (like a CDO, for instance).
  2. First movers get in and make spectacular returns.
  3. The wider market remains skeptical but the stink of money begins to suck in the most greedy and feeble-minded who instantly become investment legends.
  4. The narrative strengthens parabolically as the press begins to bend around these freshly-minted geniuses.
  5. Clients start to pressure money managers into considering the genius product. Or they move their money to someone that will.
  6. Money managers catch the drift and acceptance of the ponzi scheme grows as all are forced to shift funds into it.
  7. Finally, even conservative money managers lose the plot because their returns are lagging the new age geniuses and FUM starts to fall.
  8. It only ends when everybody accepts that the genius new product is the unassailable truth of a new era of investment and you are an idiot if on the sidelines.

It’s all about the stink of money in the end and there is no stopping the bubble until the reek becomes so overwhelming that it destroys some crucial underpinning for the bubble in the first place. In the case of the CDO, it was sub-prime property.

Where are we today in the great crypto ponzi-scheme? I would have pinned it at around phase five with the launch of BITO:

But other news flow suggests we are even deeper into the process:

Fixed-income giant Pimco has dabbled in cryptocurrencies and plans to gradually invest more in digital assets that have the potential to disrupt the financial industry, according to chief investment officer Daniel Ivascyn.

Wow. Pimco. We are maturing nicely, though, clearly, some kind of blowoff to ludicrous heights remains in prospect.

The question is, what underlying asset will BTC destroy and ultimately end itself? Will it be: banks, fiat currency, government taxation? Or something unexpected like Chinese property?

Who can say? What we can observe is that the process is well underway and maturing.

Houses and Holes
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  1. It is the greatest ponzi scheme of all time. It is also a market manipulators dream, a completely unregulated financial market where a number of large players just toy with retail gamblers over and over again which is what it’s all really about.

    When Bitcoin went through its first mega pump to 16k in 2017 companies all around the world from new fintech to old school law firms spent tons of money and searched far and wide for a use case generating a ton of meaningless buzz words in the process, they failed to find one and 5 years later they still haven’t found one – technology already exists (and has existed for a very long time now) that can do exactly what blockchain does but without exhausting the electricity of a medium sized nation to achieve a simple electronic ledger.

    The latest ‘innovations’ to try and find a use case are just getting more and more comical, take ‘SHIBA INU’ coin for an example:
    ‘Shiba Inu is a token that aspires to be an Ethereum-based alternative to Dogecoin, the popular memecoin. Unlike Bitcoin, which is designed to be scarce, Shiba is intentionally abundant – with a circulating supply of one quadrillion. The Shiba Inu Token ecosystem supports projects such as an NFT art incubator and the development of a decentralized exchange called Shibaswap’. – Market cap? $12 Billion USD with a current circulating supply of 395 trillion coins. The market cap of Coles Group is like $17 Billion USD.

    It would be funny if it wasn’t so tragic for the environment and all the gamblers (participants) getting fleeced all along the way.

    • Are you serious that the sum total of your research is Shiba coin? There are so many more interesting places to start your research and you focus on a clear scam?

      Not everything is a scam. Unfortunately, it requires a lot of work to understand.

      • Name a use case and why it has any advantage over existing/other/better/more efficient technology, and tell me why it isn’t just a complete gimmick disguised as ‘advanced technology’. I worked at a large multinational that went crypto crazy to try and seem cutting edge, in the end all of the projects were dumped (well not officially, just increasingly resources to the projects were dumped) because there’s no use case. Everything from security to payments to sales to contracts to databases can be (and is) done better and more efficiently than an electricity and computer power hungry blockchain. There’s a reason there has been no large scale adoption of blockchain to actually perform anything useful in the past 5 years and it’s not because it’s too ‘complex’.

        Don’t worry if it’s ‘a lot of work to understand’, I’ll try my best…

        • “Name one use case for cars that are better than my cheaper, more efficient, faster horse.” Great grandpappy Marvinb October 21 1908

          Great grandpappy Marvinb worked in Babcock, H.H. Company. They went into these new fangled cars in a big way. It failed. Therefore cars are a failure.

          • LOL.

            FMD that’s an hilariously awful example. The advantages of cars over horses were so clear that they became the dominant form of transport in the USA inside a decade.

  2. What is amazing is that despite all the bad news, like China banning bitcoin, it still goes up!
    I wouldn’t be surprised if Bitcoin doubles from here.
    And then becomes so big, it becomes a risk to the financial system.
    And then when it crashes we have the next major financial shock.

  3. ALL technologies follow the same Hype cycle curve.

    Crypto/Blockchain is at the peak of inflated expectations and heading over the hill to the trough of disillusionment. Blockchain/Crypto will reach the plateau of productivity after consolidating. In other words, the blood bath has to happen 1st before they become mainstream.

  4. Ghost of Stewie Griffin

    Microtransactions – I mean that is after all what the technology was invented for, small casual payments.

  5. The Bitcoin price goes through cycles of boom and bust, which are primarily determined by the Bitcoin supply. That rate of Bitcoin production halves approximately every four years. So the supply is going down, but the number of Bitcoin wallets is steadily increasing. Supply is going down, demand is going up. Ergo, the price will increase over time. If history is any guide, the current Bitcoin price will probably peak in a few months time. After which the price will crash and we will go through the cycle again in around four years time.

  6. Macro business has been poo pooing crypto for a long time, with fair reason. I just hope that if they are wrong about it in the LT which they have been, one day, when there analyses are glarring wrong (if it happens) they do some self-reflecting and publish something in why they have been so horribly wrong.

  7. Bitcoin, a speculative investment. The cryptocurrency was invented in 2008 by an unknown person or group of people using the name Satoshi Nakamoto. The currency began use in 2009 when its implementation was released as open-source software.

    Right now the US government and others are exploring Blockchain with the view to switching their currency over to it.

    And one thing all governments hate is competition. America for example banned its citizens from owning gold or using it as currency from the 1930’s to the 1970’s and China has already banned Bitcoin.

    The American government could ban BC because it doesn’t want competition with its own digital currency. They have previous form in doing this (gold example above) Whether they do or not probably depends on the 1% of old rich white guys who influence and lobby the government.
    Also was Bitcoin’s created by persons unknown, who if they wanted could go the whole Chuk Palahniuk/Fight Club scenario and blow the whole thing to hell.

    I really like the idea of Bitcoin but the tech could wiped out by government regulation, which I view is the greatest risk to BC as an alternative to fiat currencies.

  8. RanganutsMEMBER

    I’ll let you guys make millions on fakecoin investing. Roll the dice… I honestly hope those of you that are invested make a killing. You have much bigger balls than me.

    It is not for my taste though, I am risk averse and enjoy fundamental, boring investing. I am the turtle…

    • At last, a commentator who does not appear bitter.

      Anyone who says they know where this all is going is bullsh!tting. No-one does. For every “expert” there is another with an opposite opinion.

      • Even StevenMEMBER

        I think there are many that have been consistent in saying they can’t attribute a value to Bitcoin, because it’s like predicting the behaviour of crowds (in an environment which, over the past decade, has exhibited some highly speculative behaviour).

        I do agree with MB’s fundamental position though that as soon as it becomes big enough / serious enough to be a legitimate threat to fiat currency, it is game over.

        I hold no bitterness. The only thing that grates on me is people who think they are geniuses because they happen to have done well.

      • Even StevenMEMBER

        I will say that the more Bitcoin becomes accepted into mainstream… By ETFs, investment by superfunds, mums and dads, the messier it will be to put a bullet in it. But the bullet will come if needed.

  9. Jumping jack flash

    It is basically pure capitalism distilled to its essence and materialised into an electronic coin. I cant see why it wouldnt do exectly as well as people believe it could. It seems to be going ok so far. Possibly driven by a sense of rebellion against the “old ways”