Bitcoins & Bubbles: A Cautionary Tale

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It’s often said that a fool and his money are soon parted. Currently, a great many people are looking at their remaining money and wondering if it might be better spent on, say, a small herd of goats. The object of their contemplation? Bitcoin, of course. That digital bauble, currently experiencing a bit of a… correction. A ‘correction’ being the polite term for a tumble from a height that always seemed precarious to anyone with a passing acquaintance with history, or gravity.

The price, you see, has retreated from its recent, frankly improbable, peak. About half, if we’re being precise. Which, naturally, leads to the usual chorus of pronouncements. ‘Buy the dip!’ they cry. As if dips aren’t, by definition, places where things tend to… stay down. Meanwhile, the price of actual, physical gold—mined from the earth, requiring actual effort—continues to climb. A fact that’s causing a few eyebrows to be raised in the Guild of Alchemists and Venture Capitalists1.

The Return of Something Tangible

Gold is having a moment, yes. It’s up a respectable amount. Which is, in a way, a bit of a rebuke to the entire notion of ‘digital gold.’ It’s as if the market is collectively remembering that things that exist have a certain… solidity. That you can’t accidentally delete a gold bar by spilling your tea on the server. The true believers, naturally, insist that Bitcoin will ‘massively outperform’ gold over the next decade. They claim that as the U.S. dollar weakens (a process that, historically, has been more of a slow leak than a dramatic plunge), investors will flock to Bitcoin because of its scarcity—a mere 21 million coins. As if limited supply automatically equates to value. Try telling that to the owners of Beanie Babies.

The Four-Year Cycle: A Relic, or Just Wishful Thinking?

There’s a theory, popular among those who like charts and lines, that Bitcoin follows a four-year cycle of boom and bust. A rather comforting idea for those who bought at the peak. Analysts now whisper that this cycle is ‘broken.’ That ‘skyrocketing institutional adoption’ and a ‘pro-crypto regulatory agenda’ (a phrase that should always be viewed with extreme skepticism) will prevent another prolonged downturn. Some even speak of an ‘economic supercycle.’ It’s a bold claim. Especially considering that the last three four-year cycles involved a rather noticeable collapse. 2014, 2018, 2022… are we destined to repeat the pattern in 2026? The optimists hope not. They’re banking on a return to form. Which is, of course, a remarkably optimistic way of describing hoping for the best.

Institutional Adoption: A New Patron for the Digital Arts?

‘Institutional adoption’ is a fancy way of saying ‘big investors buying the stuff.’ Specifically, through these new ‘spot Bitcoin exchange-traded funds.’ It’s a way for them to get their hands on this… asset class without actually having to understand it. It’s a bit like commissioning a portrait of a unicorn. You don’t need to own a unicorn to appreciate the idea of a unicorn. The risk-averse among them are allocating a tiny fraction of their portfolios—perhaps 1% or less. But the consensus is that these allocations will increase. Perhaps to 3% or higher. If that happens, the price of Bitcoin will, theoretically, go up. It’s a simple equation. Though, as anyone who’s ever tried to predict the market knows, simple equations rarely account for the sheer irrationality of human behavior.

The Long View: A Bubble with a Better Story?

It’s easy to lose sight of the big picture when the market is in a funk. I understand. But those who’ve been around a while have seen this story before. After every collapse, Bitcoin bounces back. Better than ever, they say. I expect the same to happen this time. Though I wouldn’t bet the farm on it. Or even a particularly reliable goat.

1The Guild of Alchemists and Venture Capitalists is a notoriously secretive organization. Their primary function is to turn lead into hype, and hype into slightly less lead. Membership is by invitation only, and requires a willingness to believe in things that are demonstrably false.

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2026-02-06 12:02