Is Bitcoin a Bubble? The Ski Jump Price Pattern

During their latest episode of the VALUE: After Hours Podcast, Tobias Carlisle and Jonathan Treussard discussed Is Bitcoin a Bubble? The Ski Jump Price Pattern. Here’s an excerpt from the episode:

Tobias: Just to pick up on something that we were talking about before. So, I said the dragon king was the early form of the black swan, and the dragon king was an idea of Didier Sornette. He had the same idea that there were these tail risks that weren’t accurately– There was more probability in the tails than we thought. And so, the way that Taleb expresses it is he sells near the money options, buys the tails, and that helps you pay for it a little bit.

One of the things that Didier Sornette had this idea of the Sornette Wave, which was the every– Initially, the wave is quite big, and every dip is bought. I think they can fit some sort of– I’m not entirely sure what the algorithm they can fit to it is. You can recognize these waves when you see them. Basically, each dip is bought at an earlier and earlier point until it reaches this singularity, I guess, in which point it all falls apart. I was wondering if that’s– It does describe a little bit what we’re looking at where each dip is bought increasingly aggressively and you get this ski jump effect finally.

Jonathan: Yeah.

Tobias: To me, bitcoin looks like one of these ski-jump shapes right now, because bitcoin’s just hit an all-time high. And then you can look at the price to sales of the tech similarly has this ski jump effect to it. Have you ever come across Didier Sornette stuff before?

Jonathan: I hadn’t. It’s interesting. But again, I think it’s very descriptive. One is, if I’m understanding you correctly, I would agree with it. And by the way, again, it is very descriptive. It is consistent with what I’m describing to you as this buying the dip thing or whatever it is. What I’m describing as, “Hey, there are these kind of cracks in the sidewalk and we keep skipping over them.” And so, every time you land on the other side of it, again, go nuts, go buy the dip, do all these things. And so, there is, whatever, a happy go lucky quality to buying the dips and all of this type of activity. And the question becomes, when does the singularity moment happen where, “Hey, actually, that behavior that’s been rewarded over and over again isn’t right type of thing.”

Again, on the bitcoin part of it, paint me a huge bitcoin skeptic on a variety of dimensions. One is, I don’t know what this thing is, I don’t know what this thing does, no one’s ever been able to make a coherent argument for what it is to me.

Tobias: Writing sardines?

Jonathan: Yeah. But then even if you just say or maybe there is like this, I don’t know, there’s something fundamental here which people like Treussard is not getting, but it’s there, then it’s hard just to not to see this as a huge exercise, again, in what I would describe as wealth redistribution. I don’t think we’ve seen the half of it yet. I think people are going to really get hurt before this thing is over.

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