Bitcoin: Unsafe at Any Price
But you will wait until its price goes up anyway
Bitcoin’s price tumbled from $40,000 to $25,000 in one week.
While that’s not an extreme drop for bitcoin, it came at a bad time, when the market had no liquidity, little new money coming in, and a ton of leverage.
Some people got wiped out when LUNA and UST, two components of a widely-used financial platform, collapsed.
Analysts are conflicted about what this means.
On the one hand, we have some technical and on-chain data to suggest the bear market just ended or will end soon (one final crash, then “up only”).
On the other hand, that conclusion doesn’t fit any of the data models, cycle concepts, or the general consensus among people in the market.
It also raises questions—when did the bear market start? What do you consider a bull market?
You get the price you deserve
Does that mean you need to wait for the price to go up before you put money into the market?
In a March survey of my Crypto is Easy subscribers, 15% of respondents said they were doing just that. Since bitcoin’s price is lower now than then, I’m assuming they’re still waiting.
Seems like many people take the same approach.
In 2021, bitcoin maximalists told you that’s exactly what you should do. It’s what institutional investors do, too. Wait for the price to go. It’s safer that way. Buying low is stupid. Never catch a falling knife!
Truth be told, it does feel safer when the price goes up. Search volume and exchange activity go up. Active addresses and many other metrics rise. You see others doing it. You hear more people talk about it. Soon after you put money in, your investment goes up.
That validates your decision.
Price and opportunity are different things
The problem is, all those things happen after the best opportunities have passed. It’s no wonder bitcoin’s price went up 60% in 2021 and most people still lost money.
Once search volume spikes, exchanges get more traffic, popular people get active again, and you hear “nobody’s selling,” you need to push that feeling of safety out of your head.
This market is never safe.
The bottom is always $0, no matter how high or low bitcoin and altcoin prices go. Tether’s solvency is an ever-present concern. Scams and scammers abound. Most projects will end up worthless.
These conditions exist when everybody’s doing laser eyes and when everybody’s talking about goblin town.
When you wait for prices to go up, you get all of that risk with less of the reward.
I realize traders need to wait for the prices to go up. That’s the point—wait for confirmation of whatever direction the market’s going, then grab a little piece of that move, cash out, and wait for another opportunity. When you lose, you lose a little. When you win, you win a lot.
And you never have to worry about crypto because you don’t really want it in the first place, you want to sell it for more than you bought it for.
Are you a trader? Is that your goal?
Bear market, bro. Sell the rips, take profits, easy risk management
I hear ya.
That kind of thinking takes me back to the beginning of 2019, which most people consider a bear market. Bitcoin’s price only doubled that year. Big letdown.
I sold half of my crypto in March 2019. Some data models and traders said we should expect bitcoin’s price to drop from $4,000 to $3,000, and I figured I’d buy it back later at a big discount.
It didn’t work out the way I expected.
Fortunately, altcoins didn’t budge much when bitcoin zoomed. I had a heavy allocation to altcoins, and still do, so I was able to basically buy my tokens back in early April at roughly the same price I sold at. I lost maybe 10% overall, plus fees.
That 10% is a lot of money now, but what can you do? A lot of people didn’t buy until the price went above $10,000, just before the market crashed in July after bitcoin briefly tapped $14,000.
You’d be surprised how many people refused to buy below $4,000 because it was too risky, but happily bought at $10,000 thinking it was a sure thing.
On top of that, lots of people took profits on the way up, only to see the market go even higher—and then never come back to the price they sold at. Or worse, buy back in higher.
Good sailors don’t fear choppy waters
So, “only up” from here?
We shall see. When you buy cryptocurrencies, you’re buying experimental financial technology. Nobody knows how to value these things.
As of today, any price between $21,700 and $150,000 fits into the “normal” range of bitcoin’s volatility. Altcoins can go up or down 50% at any moment in bull and bear markets.
Will we get the +100% upswings we’ve seen in previous bear markets? Or another +30% drop, as we’ve seen in previous bull markets? Experts on both sides have called for each of these outcomes.
Does the world go into a global recession? Will the US and Chinese economies continue to slow down? Can Japan sustain the yen? Can low- and middle-income countries pay their sovereign debt? Will the war in Ukraine spill over to other countries and cause food shortages?
What other financial calamity lurks just around the corner, hidden today by the vagaries of the markets and the fog of financial speculation?
Somebody knows, but I don’t. As of today, I’m buying bitcoin and altcoins until bitcoin’s price reaches $40,000.
(That price will change over time, based on my plan.)
You could wait until the market gathers some momentum. At what price will that be? Somewhere above $40,000? $50,000? $60,000?
At that point, all the decisions will get harder. Prices will keep going up. Drops will go lower than you could ever imagine. Every bullish fractal will seem utterly convincing. Every bearish observation will seem utterly foolish. Each dip will seem like a buying opportunity, but only some will be.
And then, right before the market crashes, as it has so many times in bull and bear markets, you’ll hear somebody tell you to buy more bitcoin because it has to go up.
Yet, all the risks that exist in this moment will exist in that moment.
Cryptocurrency is a ruthless, selfish, nasty, dirty, speculative market full of people who don’t care about you or your welfare—doubly so when the price goes up.
Plan accordingly.
Mark Helfman publishes the Crypto is Easy newsletter. He is also the author of three books and a top bitcoin writer on Medium and Hacker Noon. Learn more about him in his bio.
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Good article