By Ron Stapleton
I get asked all the time “is now the time to buy bitcoin?” “Are we finally bottomed out?” Predicting the current status and future of a digital asset like bitcoin, currencies or stocks is always speculative. Some approaches to speculation are with the news, fundamental analysis, technical analysis, and valuation. Bitcoin is considered a digital asset and is quite new, thus quite risky and volatile. 2018 is the year of regulation causing a sideways movement, thus very difficult to predict.
An excellent book on speculation is. Warren Buffett stated that Carret had “the best long-term investment record of anyone I know” Carret is most famous for the long successful track record he achieved investing in Common Stocks and for being one of Warren Buffett’s role models.
Anyway, take a look at bitcoin in 2017 on the following chart.
As you will note, the very beginning of the inevitable frenzy began in August. The investors who are strong with technical analysis are the ones who say August is the month to jump in. They look at history and say “history repeats itself.” This is far too simplistic as there are many other dynamics taking place.
Now, look at the next chart for bitcoin this year so far.
Image from Coinmarketcap
So far we have had a reversal of what happened last year. The hype lost its steam and the market has been moving sideways from the 6,000 to 7,000 range since March. I have been saying (since March) that we can expect a sideways movement due to regulation, fraudulent ICO’s, schemes, etc. Many people bought bitcoin on irrational exuberance in December from 7,000 all the way to 20,000 and just have to wait it out. Many have sold their coins due to fear and the result is right in front of you. This is one element that moves the market. The other is greed. Institutional investors are just waiting for all fearful holders to dump their coins. Many experts say this will happen in the 3,000 to 5,000 range.
Look at this chart to prove another point.
Image from Coinmarketcap
This huge spike took place in less than 60 minutes. Bitcoin’s value shot up by more than $1,000, driven by the biggest one-hour trade volume in history. That represents over a billion dollars worth of bitcoin. This is the result of big players taking notice and buying. Unfortunately, some big players buy with the intent to drive up the price then sell when the irrational exuberance wears off. This is exactly what has happened and bitcoin has gone down ever since.
Many predict that we will see many more jumps like this one, but I must caution you, we can also expect the retreats as well as we have just experienced. There are many buyers, but there are many, many sellers. Sometimes the same people. Until regulation is more intact and scammers purged, you can expect such manipulation in this market.
The crypto market must come to maturity with regulation and ease of a payment system. It should also be supported with an insured ETF (exchange-traded fund) that is easily accessible. This takes time and people eager to get rich based on hype will be quite unhappy. However, if and when institutional investors dive into this market, the results could be unlike any transition of wealth the world has ever seen.
So, is it now a good time to invest and are we heading for a bull market? I’m not a financial advisor and I highly recommend that you do your due diligence. Study of howand With the recent sell-off, I believe we will no longer see a rally by the end of the year. When the price for bitcoin broke a $4,000 support, it could now go down to the $2,500 range. At this stage, bitcoin should be seen as a long-term investment. Furthermore, all money invested should only be money you are willing to lose. That being the case, you won’t sell your position out of fear when the market takes such downturns.
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