Why I won't buy a bitcoin right now
Bitcoin is on its way to the moon no doubt but its funny how history repeats itself within financial markets. Today we have seen bitcoin reach all time highs. For people who have invested in cryptocurrency before 2017 its been life changing. As of 2017 bitcoin has to crept into mainstream media with people around the world capitalizing on these significant gains. I have no doubt cryptocurrency has firmly cemented its place within the global financial markets and will transform numerous industries. These new highs may continue to $5000,$10000 or beyond by the end of this financial year. The reason I have stopped purchasing bitcoin at these highs is due to two graphs:
Source: marketwatch
As an early investor this is a dream come true. The percentage gained has outdone any financial markets in the past. However looking at the graph above I believe there will be a better opportunity to invest in bitcoin for the purpose of long term growth. In order to do so we must identify the phase bitcoin is currently in.
In early 2009 bitcoin was in stealth phase. The few that stumbled upon blockchain and had the awareness to see the big picture and built the industry as we know it today.
The awareness phase began in 2013 where we experienced the first sell off. For the last quarter in 2013 the bitcoin price surged from $120 to around the $1100 mark. This was followed by a slow puncture correction where prices decreased to around $200 followed by slow growth over a year.
The mania phase began in 2016 where cryptocurrency first gained media attention. We are still in the mania phase somewhere between enthusiasm and delusion. By analyzing the two graphs above I believe the cryptocurrency markets will follow the same pattern as financial markets in the past. This is gold for an active trader as the risk can be mitigated and downtrends are just as profitable if your smart and do your research. For a long term investor its better to hold bitcoins acquired in the awareness phase and patiently wait for the blow off to further invest at various targets on the way down.
As you said history repeats itself. Miners are also mining the coins i.e. BTC and BCH depending upon what is profitable to mine, switching between the two blockchains. Especially BCH which is more subject to more volatility. I see people moving their profits to Litecoin as the alternative. This also has lead LTC to reach all time highs presently. I wont buy BTC any time soon as i am anticipating a price drop in October, ahead of the November hard fork.
I agree and its just not worth the current risk/reward in my mind. Litecoin has seen fantastic gains in the last few weeks and I am holding onto them. Playing around in the markets now with small amounts that I can afford to lose. I think if BTC drops a lot of coins will follow. For me its about understanding the problem a cryptocurrency is trying to solve, the size of the existing market and the potential for long term growth. There are a few gems that I believe are still good investments at the current price as they are blue ocean strategies.
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STOPLooking at the chart you posted, it more looks like $4,500 is the base of another 3x run up. Reading a chart is heavily depending on your own convictions.
But I would not recommend random people to rush into Bitcoin now because I do not know their ability to withstand possible extreme losses, both financially and emotionally.
I certainly agree and the chart is not precise to date but the big picture is the price will eventually drop. A 3:1 return with traders anticipating a drop after all time highs it is not worth the risk in my opinion. I wont be selling or trying to short the market but currently to invest more the risks for me outweigh the potential gains.
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STOP