In the long run, Bitcoin goes up, trying to trade it is often a fool's errand
Here we are, sitting at $31k, which is roughly $11k off of the previous all time highs seen a little over two weeks ago.
Anyone who sold at $42k or anywhere up there is feeling pretty good about things, especially if they got back in on that brief dip below $30k.
However, there are many out there wondering if the play right now is to sell bitcoin here at $31k and try and buy it back around $20k, which was the previous all time high and would likely act as tremendous support should the price get back to that level.
Unpopular opinion - Even if that move played out exactly like I described above, where you sell it here and buy it back at $20k, it's still probably not the right move.
But how can that be @jrcornel? How can not selling now and buying it back $11k lower be the right move, you might be wondering...
Well, the answer to that is quite simple...
The market rarely, if ever, does exactly what you expect it to.
The odds of bitcoin falling from here to exactly $20k and then turning around and going on to make new highs from there is extremely low.
What happens if you sell now at $31k, bitcoin drops like you expected, but instead of getting all the way to $20k, it stops around $22k and then goes on to make new highs from there?
That means you missed out on new highs, which would be over $20k in gains (from that $22k low) because you were dinking around over $2k lower to the downside.
Do you see how the risk/reward of such a strategy starts to look pretty silly pretty quickly?
Then when you factor in the fact that not one time did bitcoin pull back more than 38% during it's previous post halving bull market (a drop to $20k from $42k would represent a 52% drop), it starts to look even more silly.
Bitcoin truly is a different beast.
Ok ok, so @jrcornel, if I shouldn't sell now and lock in some gains how to I benefit from the zigs and the zags along the way?
That is a great question and one that I don't have a great answer for except to point out what I like to do.
For me, I tend to keep a core position of bitcoin that I don't plan on selling unless the price gets to some really crazy levels, which for this cycle, would be something well north of $100k.
And then I have some other bitcoin on the side that I like to try and trade with. The bitcoin that I try and trade with I sell a little when things get overbought and buy back when they get oversold.
Usually I do pretty well with the trading portion of my holdings, but full disclosure, I now have less bitcoin that I started 2020 with due to some missteps during the recent bull market.
I thought we'd pullback some after breaking $20k, which we didn't really see much of a pullback until significantly higher.
The bitcoin that I sold when things first got overbought and then bought back when it got oversold is now less than where I started. Not a good way to make money in a bull market.
Sure, this is just one tiny example of poorly timed trades, but the overall theme is likely to be present with most people on a long enough time frame.
You are likely to do better holding through the ups and downs as the price continues to go higher over time, at least that is what it has done ever since it was invented.
Now, this only makes sense if you believe bitcoin is going to continue to go up over time, which again is what it has done ever since it was created, but if you believe that bitcoin is going to die in the not too distant future due to regulation, replacement, or something else that kills it, well then be my guest and try to get all you can out of it while you can.
However, it's hard to price in unexpected events when making an investing or trading plan, which is where position sizing comes into play, IE only putting in whatever amount of money you are comfortable investing.
Once we get past the position sizing aspect, all we really have to go on is past performance, and past performance indicates we likely have tremendous gains in our future.
If that is indeed the case, missing out on those gains will end being much more costly than not timing the exact bottoms or trading in and out of every zig and zag along the way.
Stay informed my friends.
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And there is one more really BIG gatcha with trading out of bitcoin.
At some point, bitcoin will go no bid.
There will probably still be a "price" on exchanges, but no one will be able to get any bitcoin.
People doing trading, in and out between dollars and cryptos
are going across a rickety bridge.
We all know the bridge is going to collapse... but its worked for the last 10 years... mostly.
Its only been closed a few times... at key moments...
Anyway, how much money do you need?
One bitcoin will be worth $1,000,000
You could retire on just one, just sitting on it.
But, in the end, the question comes down to when?
When will the bridge snap?
When will adoption happen?
If the dollar actually collapses, how fast will ocean traffic start using bitcoin?
Bitcoin going no bid would be interesting. At that point the dollar will have no value and probably no purpose as everything is being bought and sold in bitcoin.
All I do is HODL until the end of this bull cycle at which time I will unload most of my liquid coins but keep a core forever HODL position.
Swing trading a bull market is a fool's errand. Just as you say, it is possible to lose big time. Also, there's taxes to be considered. The last thing I want is some accounting mess to sort come next year or missing out on getting into a lower tax bracket due to holding long enough.
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That is very much along my line of thinking as well. The only problem will be trying to figure out exactly when this cycle ends. The first cycle ended after about 13 months, the second cycle ended after about 18 months. How long will this one last?
My plan to circumvent that problem is to decide certain price targets at which I'm going to cash in set proportions of my holdings of each coin. It is likely to that I will end up not selling a chunk of my bitcoins in this bull market. But that's fine because I believe Bitcoin and many of the rest will be even more valuable in the next cycle.
I'm in no hurry to sell all my position any time soon, which is why I'm fine with even missing the peak of this cycle. I don't really need the fiat, yet.
I will set the price targets based on the best estimates available. The cross-asset stock-to-flow model by PlanB is key as are estimates published by professional investors in the space. I will most likely sell my BTC between $100k and $400k and keep a portion of it as a long-term investment. That method will remove a great deal of stress from trying to time the top.
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That's a great point. If major countries don't regulate it to death, the next halving cycle will likely produce much higher prices yet again.
I like your numbers as well. Based on past patterns, this should top out anywhere between $100k and $400k, with the greater odds pointing towards somewhere between $100k and $200k in my opinion.
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STOPTo support your work, I also upvoted your post!
It probably only makes sense to do it if you hold a decent amount of BTC too. I think I am sitting on like .15 total, so I am probably just going to hold onto it and wait for those six figure numbers if they ever come. I think your strategy is smart and makes a lot of sense. If you have the funds to cover it of course.
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There is no signal currently that Bitcoin would dip to $20k or below... It might go lower than what it is now, but not that low unless something big happens in USA...
Yep, my thoughts as well. It would represent something out of the norm at this point.
In my humble and mostly uninformed opinion, selling for anything under $40,000 would be foolish. BTC will be back there sooner rather than later.
Yea, based on past patterns, the price will be higher in the not too distant future. Will they keep holding up and repeating? So far they have...