Bitcoin is up — and the zealots are back

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You may have heard — bitcoin is back. The price of the biggest cryptocurrency has surged past $42,000 and is up more than 150% this year.

With the price recovery, we’ve seen the reemergence of a certain kind of financial media character: the shill, the opportunist, the tout, the pumper.

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They were everywhere when bitcoin was climbing to record highs in 2021. When Americans were getting government checks, sitting at home, and looking to strike it rich, crypto seemed like a no-brainer, driven in no small part by FOMO — and these hype men saying it was the future of finance.

The voices got quieter when the price crashed from above $60,000 to below $20,000, although the faithful insisted this was part of bitcoin’s “typical cycle.” That quiet turned to embarrassment for some with the collapse of the Terra stablecoin, the implosion of FTX (with whom many had financial relationships), and the arrest of Sam Bankman-Fried.

But another characteristic of some of this cohort is their lack of shame. So even as all of those events were unfolding, it wasn’t difficult to find them on Twitter, hewing fast to their stated belief that bitcoin was the answer — to getting rich, to finance, to whatever.

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Will retail investors get caught up in FOMO once again? Signs point to yes. The first leg of the latest rally seems to have been driven in part by predictions (once again) for institutional investment in crypto, tied in part to the anticipation of SEC approval for spot bitcoin ETFs.

With price action comes renewed retail interest. Robinhood just reported that November crypto trading volumes surged by 75% compared to October. Robinhood CEO Vlad Tenev told Yahoo Finance Executive Editor Brian Sozzi that price appreciation begets media interest begets retail investment:

“You are starting to see retail investors wake up to certain segments of the rally. What tends to happen is, 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 become more interested, and you start to see that reflected in trading activity, at least in the past.”

All of this is not to say that bitcoin won’t keep going up, or that it couldn’t indeed play some role in the future of finance. But I’ve been at this long enough to be suspicious when a bet on an asset starts to sound like a religious belief — especially when the belief is intertwined with profit, and depends on you also shelling out cash.

There are rational voices in the crypto universe who don’t seem to just be relying 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 scale of the ETF industry, and the giant asset managers like BlackRock who are sure to allocate to their Bitcoin ETF if it is indeed approved.

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“People are getting a bit ahead of the ETFs,” Ryan told Yahoo Finance Live. But just “a very small fraction” of asset managers’ trillions would in fact be enormous. Just think of all the private clients allocating a few millions here, a few there.

“That could be hundreds of billions of market cap expansion,” Ryan said.

It may not be the moon, but it’s something.

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