The pressure of the bear market is that you watch your net assets shrink-sometimes sharply, sometimes like a financial car accident in slow motion. You don't know what the right choice is, and you don't know whether to insist on believing yourself. s Choice.
Few people tell you that when you are in a bull market, stress will not decrease, especially when you experience a bull market for the first time.
The wins and losses in this game are even greater. In a bear market, the extent of your losses depends on your initial investment, while in a bull market, your gains are actually unlimited. When you look at the rising net asset value, you have to decide when and at which point to cash out your profits, and understand that once you do this, the future benefits will not belong to you.
This is a decision made by everyone in a bull market, and almost no one can make the perfect decision.
However, we have seen some anomalies in Bitcoin. It is unique. It breaks traditional rules. The price changes over the years make us feel that there is no need to rush to sell. It will always break through the previous high after a period of time.
The five most expensive words in the investment world are, "This time is different", as evidenced by hundreds of years of financial history. Bitcoin as an alternative asset, will it really be different this time? Will it really go up as the historical chart shows?
1. The difference of Bitcoin
At the time of writing this article, Bitcoin is going through an incredible bull market, and anyone who has ever purchased this asset is now profitable.
Look at the rate of return: Bitcoin is the best performing asset in the past 11 years, and its dollar value has increased by 270% in the past 90 days alone. Is this situation sustainable?
Logically speaking, there is no such thing as a “continuous rise”. But is it possible that we are experiencing something unprecedented?
First of all, Bitcoin is an "asset". This term is used because Bitcoin does not belong to our traditional definition of securities, commodities, and other things. However, when you consider certain attributes of cryptocurrency itself, it also fits some of these categories.
We all know that Bitcoin is a currency with a built-in payment mechanism. It has now become a value storage tool in the digital age, that is, Gold 2.0, but it is safer, more portable, divisible, and applicable to everyone than gold.
This has never been seen in human history, and there is no comparable historical data, so it is difficult to determine where we will go from here.
Idealists will lead us on the road of utopia, pessimists will lead us to disaster and destruction. In fact, neither of these two situations will happen, and it is more likely that it will become a digital settlement tool in the global financial system. This may take years or even decades to achieve.
After all, from now on, we will always deliver value in the form of numbers, instead of passing large pieces of yellow metal to each other with a jetpack designed by Elon Musk. We are always moving forward, and currency is always the product of the latest technology.
Of course, this involves another "killer selling point" of Bitcoin: a truly limited supply system.
It is true that gold is scarce, but as time goes by, gold is constantly being discovered, and the technology of mining gold is constantly improving. The more the price rises, the more the gold mining speed will accelerate.
The supply of Bitcoin is a fixed number, 21 million. No matter who you are, no one can change this, nor will it be affected by price. This means that if you want to own some Bitcoin, in addition to becoming a miner, you have to find someone to buy it.
The problem is that in a market with growing demand, most people play the role of buyers.
2. Bitcoin's position on the world stage
Even the black fans of Bitcoin have to admit that Bitcoin is a limited, divisible, and very safe asset in a certain way. Everyone has a fair opportunity to earn, buy, and hold it.
The existence of such things is certainly good for everyone. Frankly speaking, the macro environment in many countries is not optimistic.
There are hundreds of famous quotes, records and charts on the Internet, which clearly illustrate the major problems facing the current financial system. However, these have distracted people from the main problem: many people have begun to accept Bitcoin, and some have even moved from other hard assets such as gold to Bitcoin.
The list of public companies and high-net-worth individuals holding Bitcoin is very long, as Mike Novogratz, CEO of Galaxy Investment Partners, said: “What shocks me is that there are so many institutions trying Include Bitcoin in their portfolio."
Novogratz is a long-term bullish person on Bitcoin. He has always been clear that institutional funds will eventually flow to Bitcoin. Then why is he still "shocked" by the number of people seeking investment? It can only be said that this number exceeds most people's expectations.
This point is very important. At present, 78% of bitcoins are in an illiquid state, and the constant circulation is only about 4.2 million. Therefore, even on a global scale, the opportunities for companies to convert some of their cash into bitcoins are very limited.
This brings us back to the previous article: The only way for ordinary people to get Bitcoin is if someone is willing to sell it to you.
The problem is that Bitcoin creates a strange paradox. When it becomes more valuable, people are actually less likely to sell it, especially when they truly understand the assets they hold. In turn, this will cause higher prices, which will cause the same problem to reappear.
This is a typical deflationary spiral. Although it is not a good thing from an economic point of view, nothing is more obvious than Bitcoin.
In short, in terms of development, use, and life cycle, Bitcoin is in a perfect position and is a near-perfect solution. This feature has always been there, but only now has it surfaced. See it more clearly.
Three, ordinary rules do not apply on Bitcoin
It can be said that no analyst has predicted the trend we have seen in the past few weeks. More than once, analysts have pointed out that certain indicators indicate that Bitcoin has been overbought (the price of the asset has risen to a level that cannot be supported by fundamental factors), and the market will undergo a correction, which may even be a very large correction.
I have no intention to belittle anyone who relies on technical analysis. The problem is that the Bitcoin market is still too small, and using the same tools on this new, limited supply asset often fails.
For me, the trend of Bitcoin is completely attributed to the balance of two powers, namely: the balance between "the demand level of Bitcoin and the degree of decline of the entire financial system" and "the dynamic combination of market rules and changes in public psychology" .
Market rules still exist. People can set stop-loss and take-profit, leverage, options, etc., just like any other asset, which can sometimes quickly affect the market. People will react immediately, regardless of the fundamentals of the asset.
For example, a few days ago, Bitcoin dropped thousands of dollars in a few minutes. The most likely reason was that a few traders (or a large accountant) sold some coins in order to obtain legal currency profits, and the price fell enough to force some excessive leverage. The liquidation of the changed longs caused prices to fall again, creating a new cycle.
In other markets, this may cause panic, and those without sufficient trading experience will sell more, causing prices to fall further. In the Bitcoin market, because the current potential demand is still not saturated, low-priced Bitcoins were immediately sold out, and the price returned to its original level before being excessively disturbed.
In different periods, the results will be different. The question is, will we see these "different periods" in the near future? With so many institutions, companies, funds and high-net-worth individuals competing for a place in the Bitcoin market, it is obvious that any low-priced Bitcoin will not stay in the market for too long.
This means that ordinary market rules do not apply here, at least not now.
So, does this mean that the price of Bitcoin will grow indefinitely?
If this is the case, this will bring a cruel reality: the situation around us will be very bad-a real disaster scenario. The rise of Bitcoin means the relative depreciation of the U.S. dollar, the erasure of people's wealth, and the endless monetary policy stimulus, all of which will bring continuous trouble to everyone on the planet.
Worldwide demand is simply astronomical for a fixed supply of Bitcoin, so the question of whether Bitcoin will continue to rise does not entirely depend on Bitcoin itself, as stated by early Bitcoin adopter Max Keiser: "The top of Bitcoin depends on the bottom of the dollar."