You may have heard: Bitcoin is back. The price of the largest cryptocurrency has surged past $42,000 and is up more than 150% this year.
With the price recovery, we’ve seen the re-emergence of a certain type of financial media character: the shill, the opportunist, the tout, the pumper.
They were everywhere as bitcoin climbed to record highs in 2021. When Americans were getting government checks, sitting at home and looking to get rich, crypto seemed like a no-brainer, driven in no small part by FOMO – and these hype men who said it was the future of finance.
The voices grew quieter as the price crashed from over $60,000 to under $20,000, though the faithful insisted this was part of bitcoin’s “typical cycle.” That calm turned to embarrassment for some with the collapse of the Terra stablecoin, the implosion of FTX (with which many had financial relationships), and the arrest of Sam Bankman-Fried, but another characteristic of some of this cohort is their lack of shame. Even as all these events were unfolding, it wasn’t hard to find them on Twitter, holding fast to their stated belief that bitcoin was the answer – to getting rich, to finance, to whatever.
Will retail investors fall victim to FOMO again? The signs point to yes. The first leg of the recent rally appears to have been driven in part by predictions of institutional investment in crypto (again), tied in part to anticipation of SEC approval of spot bitcoin ETFs.
With the price action comes renewed retail interest. Robinhood just reported that crypto trading volumes jumped 75% in November compared to October. Robinhood CEO Vlad Tenev told Yahoo Finance Executive Editor Brian Sozzi that price appreciation begets media interest, which begets retail investment:
“You’re starting to see retail investors waking up to certain segments of the rally. What tends to happen is, as we’ve seen in the past, as the price of bitcoin approaches all-time highs, the media coverage and intensity increases. And I think that plays a role as well. If people are just hearing more about crypto around them, they tend to get more interested, and you start to see that reflected in trading activity, at least in the past.”
None of this is to say that bitcoin won’t continue to rise, or that it might not indeed play a role in the future of finance. But I’ve been around long enough to be suspicious when a bet on an asset starts to sound like a religious belief – especially when that belief is intertwined with profit and depends on you putting up cash, too.
There are rational voices in the crypto universe who don’t seem to be relying solely on the greater fool theory. One of them is Devin Ryan, who covers the fintech industry for Citizens JMP Securities. He’s looking at the sheer size of the ETF industry, and the giant asset managers like BlackRock that are sure to allocate to their bitcoin ETF if it’s actually approved.
“People are getting a little bit ahead of the ETFs,” Ryan told Yahoo Finance Live. But just “a very small fraction” of the trillions of dollars that asset managers are managing would actually be huge. Just think of all the retail clients who allocate a few million here, a few million there.
“That could be hundreds of billions of market cap expansion,” Ryan said.
It may not be the moon, but it’s something.
