Hackernoon logoShould You Buy Bitcoin? Understanding the Ups and Downs by@NoamLevenson

Should You Buy Bitcoin? Understanding the Ups and Downs

This article is a big picture overview of what you should know when buying crypto right now. It's crucial that you understand some of the lessons and takeaways that those of us who did not remember the last crash. This article includes a look at the past and a look towards the future. It also includes practical advice how to store your digital assets and how to buy them. The bottom line is that NO ONE KNOWS where bitcoin is going — short-term. There are so many variables and so much of it depends on your own strategy, portfolio, and risk tolerance.
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Noam Levenson Hacker Noon profile picture

@NoamLevensonNoam Levenson

Writer. https://twitter.com/noamlevenson

Lessons in cryptocurrencies from the past and a look towards the future

Looking to buy crypto (referral links included)? -- All of these services are described in detail below:

  1. Buy through Coinbase: Signup through my referral link if you want and we’ll both receive $10 after you buy or sell $100+ in crypto.
  2. Exchange with OkEx: Sign up for OkEx with my referral link which can earn us both up to $30 as you make purchases, verify your ID, and trade.
  3. Exchange with Huobi: You can sign up for Huobi and you can earn up to $170 by depositing money into your trading account. I receive a 30% commission.

Looking for a wallet?

  1. Buy ZenGo: If you sign up through my ZenGo link, I receive $3. Enter this code (ZENX0B4G) for $10 of free crypto when you purchase $100 or more.
  2. Buy a Ledger: If you signup through my Ledger link, I receive 10% of the sale and you receive a voucher for $25 worth of any cryptocurrency

There are some things you can only learn after investing through several market cycles. It’s a fact — the perspectives and approaches you take when investing in bitcoin and other digital assets (or anything really) are entirely different the first time you invest than after the second or third cycle. With your first investment, you certainly lack the historical context, but even more importantly, you don’t know what it feels like to invest in crypto. If you are to be successful in investing in digital assets, you must understand the industry sentiment, the psychological baggage that investors carry with them from past cycles, and where the industry thinking is directed. This is what this article is about.

If you’re spooked after the recent crypto crash, read this article.

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Dejavu? This wasn't last week, it was four years ago – Source: TechCrunch

I learned these lessons the hard way. I wish I had an article like this when I began investing. My hope is that after this article, you will at least have a contextual understanding of where we are with bitcoin — not an understanding based on hype articles like those published by CNBC, authored by someone who has never invested a cent in Bitcoin and only a year ago was certain it was going to zero. I want you to learn your lessons the easy way.

I am sorry to inform you that I won’t be answering the question everyone seems to want answering: Should I buy Bitcoin now? I can’t ethically and honestly answer this question, because, the truth is, I don’t know. I do know that you should buy Bitcoin. But I don’t know if now is the best time to do so. Anyone who tells you definitively has no idea what they’re talking about and you should ignore them. The bottom line is that NO ONE KNOWS where bitcoin is going — short-term. There are so many variables and so much of it depends on your own strategy, portfolio, and risk tolerance. What I will do is try to give you as many pieces of the puzzle, as straight to the point as I can. I’ll cut the fluff so that you can make your own informed decision.

I’ve been getting asked frequently about bitcoin and cryptocurrencies. These questions range from super-beginner questions to more technical inquiries.

The results that appear from google searching this kind of information are frustrating. I remember when I was the one asking the questions and I remember the sheer repetition present in most of the articles. No one gives any answers or in-depth insights — they only rehash the same four talking points. Thus, this article is different. I compiled this article to give you a big picture overview of what you should know when buying crypto right now. I break this overview down into three main sections:

The Past / The Context: How did we get to where we are now? I want you to understand the build-up and history of cryptocurrencies so that you can invest with context. If you didn’t go through the last crash, it’s crucial that you understand some of the lessons and takeaways that those of us who did remember.

The Present: Where are we now? This gives us a big picture overview of what the situation is now, including an overview of some of the advantages and challenges currently facing Bitcoin and cryptocurrencies. This also includes practical advice: how should you store your digital assets? Where should you buy it? I recommend some products (and full disclosure, I do have referral links included). However, I only recommend services that I personally use. I received no payment for writing this article and don’t write sponsored content. This referral income helps me to continue to write for you.

The future: Where are cryptocurrencies and bitcoin going? This is the hardest to answer and there are no clear answers. Rather, I will look at a few potential outcomes and analyze the evidence for each. Hopefully, this will help you make your ultimate decision.

My referral links: I want to be 100% transparent with you all. I tell you exactly what I receive (and you) if you sign up through my links. I appreciate the support.

A side note

I haven’t written in a while. Wondering why? I had to step back and ground myself. Writing about money can be stressful. Investing can be stressful. My time away was spent in various spiritual practices which helped remind me that there is so much more to life than just money. It won’t buy us happiness. It’s not worth being stressed about. It’s a tool with which we can support our families, help people, and create meaningful lives. Please take that to heart. And meditate for five minutes before and after this article. Please.

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If you want the key points, read the TLDRs, or skip to the end.

Let’s jump in.

A Look Back: Crypto’s History

An overview of the crypto and bitcoin markets

The reality is that cryptocurrency has had a tumultuous and volatile past. That’s obvious — anyone can see this with a quick glance at the charts, but people don’t know how it feels until they’ve been through a full bear and bull crypto market cycle. They don’t know how it feels to be in an environment where everyone is making money hand-over-fist and everyone is lapping up the exuberance and optimism like dogs. That is exactly what it felt like in 2017 the moment before bitcoin dropped from a high of $20,000 to $6,700 before finally hitting $3,500 within the year. You don’t understand what that is like. People were so certain that bitcoin was going to continue its rocketing value that they simply saw each drop as an opportunity to buy-in.

Often the way it goes is this:

“Bitcoin is going up, buy buy buy.”

“Oh no, it just lost 20%, I’m scared. It might keep dropping.”

“Oh, it went back up 15%? Buy again buy again!”

Eventually, as the price kept dropping, people lost their nerves and begin to sell at a loss. It happens to the best of us. If you don’t think it will happen to you, think again. It hurts to watch your income half and then half again, and again, and again. What is the difference between losing 80% and 90% of your investment’s value? A 90% loss means first you watch your money lose 80% of its value — and then you watch it drop by half. It’s brutal.

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Hmmm, seems bitcoin proved them wrong…again – Source: Investopedia

Then, we hit a bottom. We cruised for almost 2 years under a $10,000 bitcoin. It went on for so long, people almost forgot about it. People lose interest when there’s no money to be made immediately. They think, “it might drop more. Why buy in now? I’ll wait until the market shifts.” What you quickly learn is those with patience are the ones who make big money. Those who realized that sub-$7k bitcoin was a steal and were willing to wait a couple of years to realize their gains were the ones who did well.

What fueled the 2017 run? That run was largely fueled by the ICO (Initial Coin Offering) craze. People suddenly saw how ICOs were increasing by 10s if not 100s of multiples. While there weren’t many actual applications for decentralized technology yet, the ICOs put bitcoin and cryptocurrencies on the map and fueled the excitement. Eventually though, people came to understand that the hype didn’t justify the price. There simply wasn’t enough fundamental value being generated. This ultimately facilitated the crash. 

Eventually, as crypto prices remained deflated, real use cases began to emerge. Decentralized Finance (DeFi) applications are now widely used and crypto-assets — such as NFTs — are suddenly relevant today (read more about the current state of the industry below). These new developments have driven crypto’s price up again. 

Then, last week, crypto had $1 trillion in value wiped away. Just look at how the markets reacted to a negative tweet by Elon Musk announcing that Tesla won’t be accepting bitcoin and additional regulation by China (feels like we’ve been through that again). Also, can I just say that I think Elon Musk’s sudden environmental conservationist sentiment towards bitcoin seems questionable. Did he not realize 6 months ago that bitcoin requires an enormous amount of computing power? Umm…why the sudden change of heart?

Welcome to crypto. It’s a rollercoaster. 

How do you invest wisely in bitcoin? Have a plan:

No one can really be prepared for watching all of their profits — and potentially much of their principal — disappear in a matter of weeks. You’re likely feeling the after-effects of this right now.

The mind simply can’t take it. It rationalizes it away. Everyone thinks it’s a temporary lull, so they buy more, or they hold firm. Then there’s another drop, then another. Eventually, everyone stops being able to rationalize and the true selling begins. If this market cycle occurs anything like as it has in the past, it will break you unless you do one of two things:

1. You store your crypto away and you stop checking the price (at all). 2. You are entirely willing to hold this for the long term and you aren’t interested (nor addicted) to trading (at all). You have a plan for when and how you take profits.

What’s in a plan? You should know how much you are investing and when and how much you are going to sell. You should define your exit strategy if things go south.

If you have no plan, you are gambling. If you are gambling, you will panic. You’re probably gambling if you find yourself saying things like: “I know it’s risky and I can only really afford to invest $5,000 (or whatever), but look, if it keeps running up, $5,000 won’t make me life-changing money. BUT, if I put in $20,000 that could make a huge difference in my life.

BITCOIN WILL NOT MAKE YOU RICH. Do not go in with that expectation. Manage your expectations properly. Yes, some people do get rich. You might get rich too, but not with the wrong mindset. Even if you don’t get rich, compared to normal markets, even a 50% return on your money in 12 months is a huge accomplishment. Don’t let the exuberance and greed of crypto tarnish that perspective. Invest only what you’re ok losing.

This matters for your psychological health too. You don’t want to get an ulcer because you’re consumed by regret that you didn’t sell earlier. Or consumed by regret that you didn’t buy.

I would also highly recommend that you keep spare cash for buying in at the bottom. It is very helpful to not be “all in” when things go south. Diversifying your portfolio accomplishes the same thing – sell you bonds or large-cap stocks to buy crypto at its bottom.

If you’re wondering what you should do now in light of the recent crash, keep reading, or skip to “The Future.”

Other lessons for buying crypto:

1. Recognize that both the bull and bear markets feel unprecedented (always):

When the markets are running up, everyone thinks they will continue to do so forever. They think the market is totally unprecedented and that unlike every other market cycle in history, they need to jump on the wagon now or miss out. This is what the market looked like to me a week ago.

Then it drops. Suddenly, everyone thinks that it is the end of bitcoin. How many of us actually bought and held from $3000 BTC? I’ll be totally honest with you and say that I didn’t. Do I regret it? Maybe a little. But the reality is that it’s almost impossible to buy at the bottom.

The biggest lesson I took away is that I’m never trying to buy the bottom. I’m trying to invest at the market turns. Whether I bought at $3k or $7k doesn’t make all that different considering where BTC is now. Recognize that if you’ve made money, it doesn’t really matter whether you take profits at $50k or $60k in the same way, that during the next bear cycle it won’t matter whether you time the market perfectly. So stop trying to do so. This is of course only relevant if you’re trying to trade. If you’re content to simply ride the market towards what we all hope is a six-digit BTC, then all the power to you.

2. Don’t listen to experts:

Honestly, don’t even listen to me (except when I tell you not to listen to experts). I think (this is totally unproven) that one could make a lot of money simply trading against the media consensus. When everyone is pessimistic about bitcoin and crypto, I’d be buying. When it’s hard to find a pessimistic article, I’d be selling.

No one of significance saw the crypto crash of 2017 coming. Like in a way, everybody did, because everyone knew that with such volatility and velocity there could only be one eventual outcome, but no one was willing to call it and miss out on the unbelievable upside. The same thing was happening a week ago. 

The higher bitcoin rises, the more precipitous the cliff:

Recognize that investors are nervous and wary in this space, given how relatively speculative and volatile crypto is. The higher crypto goes, the more people there are who have made money, the more people there are waiting for a sign of a turning market to pull their money out. 

Last week people are sitting on some solid crypto profits. It simply took a little bad news to send the markets tumbling hard.

A lesson: as we examine last week’s crash, we have to realize that if you were worried about the velocity at which bitcoin’s price had risen, and I was worried about it, then there were plenty of others with the same mindset. We saw how easily everyone can get spooked and start a wave of selling to lock in their profits. The higher crypto goes, the more spooked everyone gets.

We can apply this today: everyone is waiting for crypto to drop to a level that is just too good to pass up on (yeah, you're not the only one). Then a wave of buying begins. Don't think that won't happen too.

A personal insight:

This is also an entirely speculative claim, but one based on watching my psyche through the price cycles. Ultimately, since human psychology and emotion are what drive market cycles, we can gain a lot by observing our own psychology, with the assumption that we’re probably not too unique. As such, when I reach a point during a crash where I feel fear inside me and I am seriously close to hitting the sell button — that’s generally the time that I buy. Those emotions (in everyone) tend to occur at the very bottom of the drop. When I feel FOMO and am seriously considering buying (even though we’re at an All-Time High), that’s when I consider selling. When we reach those places of highly emotional trading, we usually want to do the opposite of what the emotion is telling us. Holding is also never a bad option.

Just look at how the markets reacted to Musk’s negative tweet and additional regulation by China. Ask yourself, what are your emotions telling you right now? They’re probably saying: be afraid. 

3. Don’t try to be a professional trader if you’re not willing to do the work

Professional traders study, they practice, they research, and they have a plan. I would say that they also can control their emotions — but that’s not true. Only spiritual masters can do that. What they can do is observe the impact their emotions are having on them. They know when they are in a place for rational decision-making. If they aren’t in that state, they don’t make decisions. If you don't do these things, don’t try to be a professional trader. You will only be gambling. 

The Takeaway: What is the context today of Bitcoin?

We went through an enormous rise and a dramatic and prolonged crash. Then we saw tremendous growth these last few months. We were absolutely in a bull market. The question is, where are we now?

The long-term view is that Bitcoin and Ethereum still have room to grow. Crypto and decentralized technologies in general still have room to grow — Bitcoin and Ethereum will be major beneficiaries of such growth.

I feel confident saying that the price will go up long-term. Don’t think that this is the last bull-bear cycle we will see with bitcoin and crypto. These are still highly speculative assets, meaning that they will run up and down again and again dramatically. The global market sits at an all-time high, propped up by stimulus money. 

Anyone who went through the previous crashes knows that bitcoin and crypto will always go down. It is only new investors who think that now is the time when all of cryptocurrency’s dreams are being realized and if you don’t jump on the bandwagon now, you’ll miss out on a $1,000,000 BTC. It’s also only new investors who think that this is finally the time that BTC is going to zero. 

Recognize that crypto has made a big leap forward, but it is still far from where it can be (and many expect it to be). 

TLDR:

  • Crypto is volatile.
  • Speculation fueled the last bull market in 2017.
  • There is more substantial value today. But this run is still largely speculative.
  • Bull and bear markets ALWAYS feel unprecedented.
  • Dramatic price increases by definition are unstable
  • Don’t trade unless you’re taking it seriously.
  • Don’t listen to the experts. If anything, do the opposite of what they say.

The Present

There are two important questions to ask: why is crypto valued where it is and what is it actually worth? To answer the first question we must analyze those factors that facilitated today’s market. To answer the second, we have to analyze the existing fundamental value of the industry.

The good news about crypto:

What separates the current state of crypto and decentralized technology from say, 2 years ago, is that we’re seeing real applications in use. We have seen the explosion of lending platforms that allow users to stake their crypto and earn interest on their holdings, or borrow crypto. We call this Yield Farming. Current rates far surpass traditional rates offered by other financial products — like federal bonds or banks.

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Source: Dapp Radar

These applications are managing real money. Curve, MakerDao, UniSwap, WBTC, Aave, and Compound handle collectively tens of billions of dollars. That’s real capital.

We also are seeing a rise in interest in digital assets — often called NFTs (Non-Fungible Tokens). This is the best article I’ve found on getting NFT exposure. These are digital art pieces that retain their uniqueness through a unique identifier stored on the blockchain. Yes, you can screenshot them and still enjoy the art pieces. But you cannot truly replicate an NFT which makes it a scarce asset.

Other, related centralized companies have also benefited greatly such as wallet companies —ZenGo, BRD, and Coinbase.

The bad news about crypto:

We have to understand the difference between associated value and actual value.

Actual value is value accrued when a service, product, or software is sold to customers. Assigning an exact value is hard, but we know it when we see it. Actual value should also create more value. Pet rocks had actual value — people paid for them — but they didn’t create more value. Software creates more value because it enables businesses and people to expand their own services. When people talk about utility tokens, they’re referring to tokens with actual value. These tokens are integral parts of ecosystems that provide some service or network for people.

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Associated value is all the value built around the actual value. This is usually in the form of debt. We can understand this in regards to the total size of the debt market in comparison to the amount of circulating money — $250 trillion — which represents approximately 50x the $5 trillion of circulating global money. Debt instruments qualify under associated value. Speculative investing qualifies under associated value.

Bitcoin does have actual value, but most of the crypto ecosystem is still only built on associated value. We have yet to see productive, truly decentralized ecosystems. DeFi is a secondary value market built on top of an asset. The intrinsic value of these markets is based on the underlying value of crypto assets. If the underlying value of crypto collapses, so too will these markets. The problem is that even the underlying assets lack much actual value. Bitcoin's actual value today is based on it serving as an alternative payment means  or store of value disconnected from the fluctuations of the dollar and traditional markets. The problem is, bitcoin isn’t that yet. Most of its value is built on the idea that it will one day be that. Ethereum too. Most of Ethereum’s value is built on the expectation that it will one day support powerful, self-sufficient ecosystems. But it isn’t that yet. People only use crypto today to make money. Making money with money sounds like associated value to me — i.e. debt — and the decentralized ecosystem mostly consists of debt instruments. We need applications that are generating their own unique value — i.e. utility value. When the underlying value is entirely based on demand, then the token itself really has no underlying value. Only when there is demand generated through some utilitarian need can there be true value (i.e. utility tokens).

Even decentralized applications remain largely novel. Only four DApps have 10k+ users. There are no true decentralized ecosystems generating their own value. What would this look like? Imagine a supply chain being based on the blockchain where if one wants to benefit from the utility of the application, they have to own the cryptocurrency. We haven’t seen that yet. That will be an enormous achievement when we do.

What does this mean?

It means that we’re getting there, but we’re not yet there. We took a big step forward with this run, but we still have a ways to go. When we look at the current crypto market we honestly see that, technologically, it’s expressing only a fraction of its potential. With this realization, I knew that we had a crash coming. This wave was driven on the hype of a technological leap forward. Those who paid attention saw it coming as crypto traded in the bear market. But it has exceeded the actual technological implementations currently available. There will be more cycles. More downs and ups.

Recognize that technological advancement and market price move together but sporadically. Often it goes like this:

Tech advances — price remains stagnant
Price catches up and far exceeds tech
Price crashes, dropping below the tech advances
Tech continues to advance
Price again catches up and far exceeds the tech

And so on…

We saw that the first wave was from an entirely unproven, theoretical cryptocurrency to ICOs. The first wave happened because the price was far deflated in terms of the actual development of the ICOs and the new technical concepts emerging. Crypto exploded. But then it far exceeded the actual implementations and we saw a crash. Then, DeFi and NFTs began to grow and see success. Next came the price increase, of which we are currently in the midst. Then we saw this recent pull-back. I still think that the market sits over-inflated compared to its fundamental value. Assuming prices continue to drop, we will eventually hit a point where the tech again will exceed the price — probably in the form of decentralized applications and truly functioning ecosystems. Then we’ll see another big price increase.

Practically, how can I buy crypto today?

Ok, so if you want to buy crypto now, here is how I would do it. It’s more difficult if you’re not in the United States, but it is still possible. I am going to advise on how to buy with an American bank account, as that is how I do it myself. Any of my recommendations below have been tried and tested by me.

What crypto services should you use?

Fiat to Crypto: Coinbase

I use Coinbase as my fiat-to-crypto platform. I deposit USD on Coinbase and then I transfer it to Coinbase Pro (you'll have to sign up through Coinbase first). From there I buy crypto with my fiat. This keeps the fees down by a lot. Coinbase is by far the most user-friendly that I’ve found. But don’t ever buy crypto with fiat directly through Coinbase. Do a bank transfer and then buy on Coinbase Pro.

Disclosure: Signup through my referral link if you want and we’ll both receive $10 after you buy or sell $100+ in crypto.

The risks?

Coinbase is centralized and they handle a lot of cash. That makes them a prime target for attacks. I try not to store too much BTC or cash on the platform as, although I trust them not to steal, I don’t want to have to trust their security when they’re a custodian for billions of dollars. Your money is protected by the FDIC up to $300k, but only if your money is in USD on Coinbase (i.e. they don’t insure USD on Coinbase Pro or any of their crypto holdings).

Crypto to Crypto

For crypto-crypto trading I use Binance, OkEx, or Huobi. Binance is my favorite, but they can cause problems for American citizens. I’ve had to opt to use Binance.us but they have more limited trading pairs. All three  — although Binance especially — have proven themselves trustworthy as organizations. But again, I don’t recommend storing any crypto on their exchange.

Disclosure: I have no referral code for Binance. You should enter in a referral code when you do though as it nets you a fee discount.

You can also sign up through my OkEx referral link which can earn us both up to $30 as you make purchases, verify your ID, and trade.

You can sign up for Huobi and you can earn up to $170 by depositing money into your trading account. I receive a 30% commission — but this shouldn’t take away from your earning potential at all.

What wallet do I use?

For a wallet, I use ZenGo. This is controversial since they aren’t a hardware wallet. They use threshold signatures technology to distribute your private key between your iCloud account and their servers so there’s no single point of failure. You are also able to restore your wallet on any new device. Even though it’s not a hardware wallet, the convenience of the app, the fact that I can’t lose my private key (which I have done before), and the fact that the team and company still can’t access my funds, is enough for me. I also know and trust the team; they are extremely professional. I’m comfortable using and trusting their app. I know that some may not be, but I’m simply sharing my own preferences.

I still do use a Ledger at times, but it scares me to do so. It’s not optimal in my mind except for large amounts that won’t be often moved. Even then it still scares me.

The truth is, I have lost my private keys before. I am responsible. I do know what I’m doing. And still, it happens. Handling money makes us anxious. Anxiety makes us make mistakes.

Disclosure: If you sign up through my ZenGo link, I receive $3. Enter this code (ZENX0B4G) for $10 of free crypto when you purchase $100 or more–this code doesn't benefit me at all.

If you signup through my Ledger link, I receive 10% of the sale and you receive a voucher for $25 worth of any cryptocurrency.

The Risks: ZenGo has proven to be a trustworthy company and so has its technology, but it still does require a certain degree of trust in using a centralized application to store crypto. The risk of using other services, like a Ledger, is that you have to be sure to store and remember your private key (also, if you have multiple Ledgers, make sure to remember which private key goes to which device).

DEEP BREATH HERE

Money isn’t everything. Don’t FOMO. Don’t panic sell. Realize that money will not make you happy, being happy will make you happy. Making money will not stop you from worrying about money. Stopping to worry about money will stop you from worrying about money. If you can, realize the truth of that. We rule money and not the other way around.

The Future

Why did the 2017 crash happen and what is different now?

The 2017 crypto bull run was truly an ICO bubble. Ultimately, that crashed pretty dramatically. The reality then was that the hype and velocity simply wasn’t matched by actual applications. Even if it was, no amount of fundamentals can support that kind of upward growth without eventually seeing a pull-back. The pullback happened swiftly and brutally.

This market cycle is proving to be very similar. Yes, the technology has improved. We are seeing true DeFi applications and demand for non-fungible digital assets, but we aren’t seeing widely used decentralized apps yet. As I said before, most of the value in crypto is still associated value. We’re not seeing true decentralized ecosystems. We’re not seeing widespread use of crypto as a replacer of fiat. I think that those things will have to happen before we can see Bitcoin reach the levels some are predicted (such as that of gold).

The NFT craze feels very much like the ICO craze. It’s driven pretty much on novelty right now. I think, long term, we’ll figure out a use for NFTs, but I think it will be more tied to real-world assets. Ultimately, I think people still want to show off their art. It would be interesting if we could make LED paintings that show off digital art — and one had to own the NFT in order to show it off. I have no idea how that would work. But there has to be some value for the art outside of being a pure store of value.

What about altcoins?

You can make and lose a lot of money investing in altcoins. When the markets drop, altcoins will too. You’re essentially gambling unless you’ve done considerable research — even then, in the short term you’re gambling. Perhaps in another article, I will share what altcoins I think are worth looking at. Stay away from things like Dogecoin, obviously. Yeah, it went parabolic. But what you quickly learn is that you don’t invest in things people are only investing in to make money. How many investors in Dogecoin believed in it long term? Most were there to make money and bounced when it turned red. Someone is always caught footing the bill.

What is my (probably totally incorrect) prediction for the future?

Something that I have noticed is that ETH generally trails the price of BTC. Keep an eye out for that. Usually, when BTC has a run, ETH is close behind. It’s your chance to catch one train if you missed the other. But observe this yourself a few times before taking my word for it. Please.

There are two scenarios I see happening:

  1. Crypto recovers much of its lost value and continues its climb upwards. It is buoyed largely over inflationary concerns with the dollar. There is also an enormous amount of circulating cash out there right now. Additionally, the traditional markets have held their value in spite of the crypto crash which means that there are a lot of people on the sidelines excited for a potential chance to make an entrance. 
  2. This crash eventually pulls us back to the $10–20k point for the next bear market before making an even larger run. I think that bitcoin eventually touches this price point regardless of the short term.

I think that crypto will recover in the short term and continue climbing, perhaps even to the $100k level. Afterwards, we will see another market tumble and potentially watch it fall down towards the $10–20k levels.

It simply doesn’t add up for me to think that we have reached a point where crypto and bitcoin moves from being a highly volatile, speculative asset to being an established asset-backed by real value. I just don’t think that we’re at that point yet. What that means is that there will be an eventual crash before the inevitable climb back up afterwards.

The Bottomline: What is my advice to you?

If you were thinking about investing when BTC and ETH were at all-time highs, why not invest now? The future hasn’t changed at all. You just got a 50% discount. If you’re not going to invest now, then it is a good learning opportunity to observe how emotional investing is.

Everyone always wants to invest when it’s at an all-time-high — that’s FOMO. No one ever wants to invest when it’s at an all-time-low. That takes courage and foresight. People with courage and foresight make money in markets.

Given all this, if you have money and you’re looking to make a purchase, I think I would invest about 50% of it now and keep 50% on the sideline. Invest an amount where you will be satisfied with your gains if it continues to go up, but retain capital for the chance that it crashes as well. I would set myself a target price where I will be taking profits if the run keeps going up. I’m looking at the $100k mark for BTC and I imagine that I’m not the only one thinking like that.

Alternatively, I would decide how much I want to invest in crypto. I would invest x amount now and dollar-cost average my buys. I think this is the right mindset. You’re trying to accumulate cryptocurrencies and store them away. If you do this, you will do better than 90% of the people investing in crypto — including historical me. This is my advice to myself now. Don’t try to get rich. Try to be smart.

If you are in the markets now, don’t sell. Keep holding. I don’t think now is the time. I would consider making additional purchases. I purchased some $36k bitcoin. But this is all according to one’s risk appetite. Ultimately, this is why we don’t invest money we need in the short term. Bitcoin and crypto WILL go back up. It’s just a matter of time. Every price drop makes it a more, not less, appealing investment.

Key insights:

These are key understandings that are important for you to understand. If you read the entire article, you’ve already seen these.

Invest with your psychological health in mind too: You don’t want to get an ulcer because you’re consumed by regret that you didn’t sell earlier. Or consumed by regret that you didn’t buy.

Bitcoin will not make you rich: Do not go in with that expectation. Manage your expectations properly. Yes, some people do get rich. You might get rich too, but not with the wrong mindset. Even if you don’t get rich, compared to normal markets, even a 50% on your money in 12 months is a huge accomplishment. Don’t let the exuberance and greed of crypto tarnish that perspective. Invest only what you’re ok losing.

Higher prices mean more dramatic sales: The higher crypto goes, the more people there are who have made money and are now waiting for a sign of a turning market to pull their money out.

Don’t listen to experts: Honestly, don’t even listen to me. I think (this is totally unproven) that one could make a lot of money simply trading against the media consensus. When everyone is pessimistic about bitcoin and crypto, I’d be buying. When it’s hard to find a pessimistic article, I’d be selling.

Recognize that technological advancement and market price move together but sporadically. Often it goes like this:

  • Tech advances — price remains stagnant
  • Price catches up and far exceeds tech
  • Price crashes, dropping below the tech advances
  • Tech continues to advance
  • Price again catches up and far exceeds the tech
  • And so on…

Stay away from hype-coins like Dogecoin. Don’t invest in hype cycles. Someone always ends up footing the bill.

ETH usually trails BTC: Something that I have noticed is that ETH generally trails the price of BTC. Keep an eye out for that. Usually, when BTC has a run, ETH is close behind. It’s your chance to catch one train if you missed the other. But observe this yourself a few times before taking my word for it. Please.

Everyone always wants to invest when crypto is at an all-time high. But the truth is that high prices are riskier not less. Everyone always wants to invest when it’s at an all-time-high — that’s FOMO. No one ever wants to invest when it’s at an all-time-low. That takes courage and foresight. People with courage and foresight make money in markets. Crypto is selling at a 50% discount. Its future didn’t change one bit. Invest with that in mind.

It’s entirely unpredictable. This recent crash shows that the markets move dramatically based upon totally unpredictable news. MANAGE YOUR RISK. 

It’s just money. It’s not worth being unhappy over it, even for a second.

Additional Articles You Should Read:

https://jeangalea.com/buy-bitcoin-now/ 

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I received no compensation for this article.  This is not investment advice, merely my opinion on the matter. You should do your own research and temper my words with your own wisdom and risk appetite.

FOLLOW me on Twitter: @noamlevenson

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