You Were Likely Given Very Bad Advice on Bitcoin
A few years ago, when nobody but the connoisseurs talked about cryptocurrencies, I practically pleaded with a former InvestorPlace editor to allow me to write about Bitcoin (CCC: BTC-USD).
Smartphone with bitcoin chart on the screen between piles of bitcoins
Scroll to continue with the content
Minimize business interruptions with cloud-based BCDR
Attend the webinar to discover cost-effective cloud backup and disaster recovery solutions that are scalable, easy to deploy, and help protect data.
He must have thought I was crazy, but deep down I knew he was wrong - even though I couldn't tell at the time. Today I have a more nuanced opinion on BTC that I think really deserves attention.
In general, I stay away from masturbation, especially when it comes to investment markets. Believe me - if you rely on speculation for validation, you will have problems. But relying on other people's speculation for confirmation is a recipe for long-term failure.
InvestorPlace - Stock News, Stock Advice & Trading Tips
However, when it comes to the ups and downs of Bitcoin and other cryptocurrencies, I am the expert who has gone through all stages except obviously desperation and suicide.
Don't get me wrong - I've had some dark moments with Bitcoin and the cryptocurrency complex. However, I made some random bets earlier in the crypto narrative and they paid off really well. I can truly say that this asset class has changed my life like no other. Most noticeably, I bought my house direct - and in a very desirable part of the US, thank you very much!
The 10 best stocks to buy to get you through your day
But that also means that I mostly got off the Bitcoin train. And actually I have. Granted, I was too early with my exit plan. But the thing was, BTC changed my life in other ways, and not for the better. I suffered from chronically high blood pressure during most of the insane run-up to the crypto market. I couldn't believe how stupid speculation turned me into a superstar, even though nothing has fundamentally changed about me.
But I also knew this ride could end in a heartbeat. If you look at the BTC price now, it looks like it will be soon.
Be brutally smart with Bitcoin
Looking at various opinions of lawyers in the blogosphere, I have come to the conclusion that disbelief has caused much of the pain Bitcoin holders are currently going through. First and foremost, you will hear the argument that big institutions are buying BTC. You will also come across the inflation argument.
How can Bitcoin collapse like this when these two main catalysts work in favor of decentralized assets? Well, these two bullish arguments are critically flawed.
First, while institutions have bought bitcoin, you also need to remember that they are responding to shareholders. And I just don't think they feel like they are exposed to such a volatile asset. So, to avoid catastrophic damage, if BTC continues to decline, you can reasonably expect these institutions to exit.
Second, inflation may not be the biggest threat to the world economy, but more of a deflation. Look at the trend in the dollar's money speed. It is currently near an all-time low, while employment levels in the US are down 4.5% from just before the pandemic. This is deflationary pressure, not inflationary pressure.
But the biggest contributor to Bitcoin's current impact is market psychology. One of my most recent projects is helping create content for Blockster.com, an information center and community for cryptocurrency-related opportunities. In an article published May 13th, I described how BTC jumped too far and too fast.
While I am going to read you the detailed details of my thesis - which includes explanatory diagrams - the main argument is that Bitcoin needs to build support at lower price thresholds before it flies to higher thresholds. In other words, BTC must first build the foundation before tackling the ceiling.
Instead, BTC built a cap of over $ 60,000 while glossing over its previous high of just under $ 20,000. Of course, BTC will (finally) fall because it hasn't established credibility at $ 20,000, let alone $ 60,000.
Hence, smart play based on the science of market psychology should gradually sell as BTC neared its peak.
Keep an eye on the incoming lows
At the time of writing, Bitcoin is trading at just under $ 37,000. If you're curious where I am at, I wouldn't be a buyer here, even though it's almost half its all-time high. Rather, my downside target is between $ 15,000 and $ 20,000.
Why this range? If you look at the charts for my story on Blockster.com you will find that there is little trading action in this particular spectrum. The way I see it, in this price range, BTC will first build credibility and then slowly build the foundation between $ 20,000 and $ 40,000. From then on, a six-figure goal is not ruled out.
But it has to do the work first. And that's why I'm currently not comfortable adding cryptos to my portfolio. Let the volatility play its part; Above all, let out the big institutions (which I think they will). We talk from there.
At the time of publication, Josh Enomoto held a LONG position on BTC. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com's posting guidelines.
Josh Enomoto, former senior business analyst at Sony Electronics, has helped broker key contracts with Fortune Global 500 companies. Over the past several years, he has provided unique, critical insights into the investment markets as well as various other industries including law, construction management and healthcare.
More from InvestorPlace
Stock miracle that NIO found for $ 2 ...
It doesn't matter if you have $ 500 in savings or $ 5 million. Do this now.
Top Stock Picker Reveals Its Next Potential 500% Winner
The post where you likely got very bad advice about Bitcoin first appeared on InvestorPlace.
You should check here to buy the best price guaranteed products.
The unintended consequences of marijuana decriminalization
DaBaby Tries To Brush Off Questlove By Claiming He Doesn't Know Him. It Backfires.
Abigail Breslin Feels Pigeonholed by Little Miss Sunshine Role: 'People Forget' I'm 'Not 9 Anymore'
Jennifer Lopez and Ben Affleck Continue Their PDA Tour by Making Out on a Naples Dock
Clare Crawley of 'The Bachelorette' says she is on 'the road to healing' after having breast implants removed
Retired NFL fullback Anthony Sherman compares COVID-19 vaccination wristbands to racial segregation