The price of bitcoin is now in the $5,000s. Condolences if you bought at $20,000. The question now is how far will it fall and how to buy the bottom?
This is where we are as I write:
I believe you should always look for and at the obvious in any chart. So this is the trend:
This doesn’t mean it is going to zero, just that this is the road the bitcoin price is on. Until it materially leaves this trail, it is going down.
The next question you need to answer: does bitcoin have a future? Some say it doesn’t, but I think it does and I should think you do too. So all we have to do is find the bottom and buy it.
Let’s put in some suggestions:
Again, none of these levels are destiny, they are only areas where the market felt equilibrium in the past. As such, you would expect these levels to act as at least potential resting points or the bottom in a fall.
Bottoms are very rarely V-shaped; they tend to be W-shaped, so what we are looking for is this:
Where I’ve placed this W is just an example, a kind of best guess, but it is to show what the bottom will likely look like.
You can play the bottom many ways. I might buy a chunk at every level down, or try to buy the last leg of the W.
Buying the last leg is much safer but needs a lot more self-control. The bottom will not happen overnight as the W will have to form. This can help an entry if you just want to buy into bitcoin a little lump at a time. I will most likely do this, averaging in.
Ultimately, as with all investments, you play the percentages. As the price falls, the percentages that you are nearing the bottom increase, so long as you think the asset has a future, which after all many assets do not, especially in equities. As the price falls you should have been buying so you can get a good spread across time to have a solid average. Better to buy late than early. As long as you buy near the base of the W you are in good shape.
As long as the current trend is in place, bitcoin is going down and when the trend breaks it may be too early to jump in too heavily. This is so reminiscent of the Nasdaq in the dotcom crash it is good to use it as a guide to what is unfolding.