Okay, Bitcoin hit $116,500. Everyone's screaming "to the moon!" Before you get a second mortgage on your house and yolo into crypto, hold up a second. We've seen this movie before. Remember 2021? Hype, exuberance, then... splat.
Now, I certainly am not predicting that Bitcoin is going to zero. What I’m arguing is that following the herd without thought is a plan for future calamity. To grasp the full picture, you have to go beyond the headlines and focus on what’s truly powering this historic rally. To be candid, much of it strikes me as hooey.
Trump's Crypto Embrace: Genuine or Calculated?
So, would you look at that, Trump’s supposedly set to sign an executive order to expand crypto access in retirement accounts. Sounds bullish, right? Maybe. Consider this: Trump is a master manipulator. He’s a genius at policies that excite his base. Maybe this “crypto-friendly” policy has less to do with belief in the merits of blockchain technology and more to do with collecting voters.
Think about it. He's a businessman above all else. He sees the growing crypto community, the potential for donations, and the narrative of being the "people's president" fighting against the establishment. So don’t be so naive as to believe that this is all just about the technological innovation.
The shift of retirement capital into crypto is no doubt a huge boost. Still, we don’t know the long-term impact. We should be asking if these funds are actually prepared to withstand the volatility. Or are we just creating the conditions for a second round of on-the-cheap panic selling, once the market corrects as markets are known to do?
Rate Cut Euphoria: Masking Deeper Problems?
The market’s also getting caught up in the excitement over a possible Fed rate cut in September, courtesy of some soft jobs data. July’s nonfarm payrolls were a paltry 73,000, and the unemployment rate rose to 4.2%. Instead this is being spun as a positive for crypto because it will bring the “easy money.” Or worse yet, what if it’s an indicator of something far more nefarious.
What if these rate cuts were never meant to stimulate growth at all. What if they’re just an aggressive response to avoid a recession. This is because interest rate cuts are used to stimulate the economy when things are going poorly. Think about it: the Fed only cuts rates when the economy is showing signs of weakness. It’s the equivalent of giving painkillers over setting a broken leg. Sure, it can include building a beautiful new bridge to completely mask the pain, but it’s not resolving the underlying issue.
Here's the unexpected connection: a struggling economy is not necessarily good for Bitcoin. Yes, as so many have touted it as an inflation hedge. In a big recession, people desperate to sell whatever they have including their crypto holdings, their crypto dexes, do wonder what their value is.
The Chart That Should Worry You
Okay, here it is. The moment of truth. While everyone's focused on the price charts and bullish flag patterns, I'm looking at something else: Bitcoin's On-Chain Transaction Volume Adjusted for Entity Transfers.
| Metric | Current Value | 3-Month Average | Change |
|---|---|---|---|
| On-Chain Volume (Adjusted) | $5.2B | $7.8B | -33.3% |
This chart reveals a disturbing trend: while the price of Bitcoin is soaring, the actual usage of the Bitcoin network is declining. Adjusted On-Chain Transaction Volume takes into account only the transactions occurring between unique entities. This allows you to get an objective, unbiased picture of what’s really happening on the network. That’s a sign that speculation and leverage are stoking this rally’s flames. What’s puzzling is that real adoption and usefulness appear to matter somewhat less than other factors. It’s the equivalent of designing a house on sand – pretty to gaze upon, but it won’t last.
That’s because a robust Bitcoin ecosystem depends on having a healthy flow of transactions. That’s a great indication that people are really using the network to make payments, conduct transfers, engage in other applications. When on-chain activity is plummeting, it indicates that the current price spike is unrealistic.
Don’t get me wrong, altcoins such as Pudgy Penguins and Ethena are bullish. Institutions are supposedly accumulating ADA and RTX. Ethereum is holding above $3,600. These are only data points in a broader, more complicated landscape. They don't guarantee a continued bull run. It’s possible they’re just early warning signs of a pump-and-dump scheme brewing.
Don't get caught up in the hype. Do your own research. Look beyond the headlines. Understand the risks. And, above all else, never invest more than you’re willing to lose.
Remember, Bitcoin is a volatile asset. It's not a get-rich-quick scheme. This is a long-term investment that will take time, patience, discipline and a healthy dose of skeptic. Don’t believe the hype just yet—sharply counter THIS chart reality-check. It could potentially save you from a hole heap of pain.
Don't get caught up in the hype. Do your own research. Look beyond the headlines. Understand the risks. And most importantly, don't invest more than you can afford to lose.
Remember, Bitcoin is a volatile asset. It's not a get-rich-quick scheme. It's a long-term investment that requires patience, discipline, and a healthy dose of skepticism. Before you jump on the bandwagon, take a good look at THIS chart. It might just save you from a world of hurt.
