Join 78,982 users and earn money for participation
read.cash is a platform where you could earn money (total earned by users so far: $ 585,817.91).
You could get tips for writing articles and comments, which are paid in Bitcoin Cash (BCH) cryptocurrency,
which can be spent on the Internet or converted to your local money.
Investing in Bitcoin and cryptocurrency is lucrative, but not for all. It is unprofitable for most of the investors that as usual bought right at the top.
We enter the Crypto Universe with ambition after we read about all these stories of sudden riches.
But the result is always the same, we were late and bought the top!
The moment most of the investors enter Crypto, the price will crash since the prices will be already at unsustainable levels and no new investors will be willing to buy.
You may think that you got unlucky buying the top of a mania phase, but was it luck, or was it the system that pushes most investors to buy at unreasonable prices way above the average growth and fair value of these assets?
The market was doing great. Everyone was already super excited and spreading the message that cryptocurrency adoption was inevitable. So, you bought, with no reasoning but because you were pushed in this direction by the mainstream media and influencers on Twitter.
It happens to most of us when we first enter the unknown world of cryptocurrencies. Unless we were lucky, unless we had time to spare in this when nobody was watching and the media was focusing on other financial events, we will buy the top.
Bitcoin rally this year is the start of going mainstream, not a bubble, says investor Bill Miller
-CNBC April 20, 2021 Bitcoin's price: $55,780 (Source)
Many retail investors will buy after watching discussions about Bitcoin on Bloomberg, CNBC, or any other financial network.
Twitter is telling you $100K is a certainty. You read about crypto on Twitter again, and there it is! Validation!.
PlanB has this amazing chart he published years ago, and it seems it is working! Right? But wait, there are so many more! This Pompliano guy has a million followers! How can he be wrong even when he is not accepting Bitcoin for his “Bitcoin Pizza” little scheme!
Celebrities are now in Crypto, it is going to be huge and you think you shouldn't miss this opportunity. Your neighbors are already in Bitcoin and Doge, your boss at work had just bought a few Ethereum and then, Musk himself is tweeting about this cute little Doge, and all the memes he posts are so popular!
Then this guy, Michael Saylor! A remarkable entrepreneur that survived the Dot-com bubble and miraculously made it to a billion-dollar net value!
Then you got Cathie Wood, Paul Tudor Jones, Mark Cuban, Bill Miller all invested in Bitcoin and giving their backing! Laser Eyes!!
Celebrities join the “fight” next! Paris Hilton, Floyd Mayweather, Snoop Dogg, Kanye West, Mike Tyson, Tom Brady!
These guys are already billionaires and are so kind to their followers that are willing to share their investment strategies!
Yes, buy Bitcoin since all these individuals had the guts to do it and are in such huge profit already. You should follow those that made it and now actively promote Bitcoin and cryptocurrency.
But as usual in crypto, 90% of investors will buy right at the top.
Dollar-Cost Average, they tell you, perfect strategy!
But when they will tell you about it? When the market is already over-performing and previous rational investors are in taking-profit mode.
Yet, the financial crypto-gurus will advise you to keep buying even at extreme prices. DCA can work on stocks for decades since the bullish sentiment doesn’t evaporate easily, but it can’t apply to crypto without modifications.
The Crypto Market is more similar to penny stocks on steroids. Even the top cryptocurrencies experience extreme volatility that makes DCA a matter of correct timing.
It is not a correct approach to DCA your way in crypto after a year of a bull market. This is practically identical to buying the top. Or it is also similar to de-investing or selling at a loss when the market has dropped significantly and the chart flashes huge support levels.
How much have you made following DCA since May? Crypto is not the stock market and tricks may work, but only temporarily. Dollar-Cost Average is the way to buy after an enormous drop and for a long perios of consolidation, but will not apply to most cryptocurrencies.
However, this is all about planning. What we expect and how. When prices rise by 10x and DCA is certainly a mistake. In fact, after such a rise, those advisors that instruct you otherwise, they are misleading you and they are also the ones taking profit when telling you to keep buying.
There is finite money for retail investors. You can’t keep buying for four years to make a profit. DCA looks more like the ridiculous Martingale system some gamblers still use. It only works when there is an infinite amount of money, so it is not realistic.
The right moment to buy is when you feel that this is a lost cause. You will check the prices and feel this was a disaster. Every crypto is in red for weeks and looks doomed.
When you check prices and see a market that after 80–90% from ATH is still dropping. This is when you should start buying.
When nobody is talking about Crypto, when Twitter has completely forgotten about it, and at moments when Cryptocurrency is brought as a topic in a conversation, everybody instantly dismisses it.
Maybe a year later. Right now, it is still dangerous. Some coins/tokens are down by 80% since ATH, but this is still not a good indicator to buy. They can always go down further, perhaps another 80% or 90%.
The only indicators we have about cryptocurrencies are the averages. These are not stocks to analyze sales, productivity, cost reduction, management decisions, marketing efficiency, etc.
There is no business model in any of them, the price is subject to just three factors:
The Network Effect
There is nothing else beyond these three factors that give us a better understanding of the value of cryptocurrencies.
We evaluate networks differently according to their network effect.
Facebook, for example, applied to the masses with free services. It is a business that creates income from commercials and the sale of personal data to advertisers.
Ethereum applies to finance. It failed to reach mass adoption since, just like BTC, its network could not scale under the current development.
An enormous problem that some networks have solved (BCH) but the rest didn’t out of concerns over “centralization” and instead proceeded with other strategies (switch to digital gold).
However, Ethereum is a network that can’t sustain itself on high fees. The Ethereum community realized this and is planning with Ethereum 2.0, and lately with the London fork to improve the scalability of the network.
Network Economics is different depending on the user base of each network. In this term, Ethereum has a purpose valued higher than Facebook, thus while it doesn’t have the user base (billions of users) Facebook has, it still has the potential to grow in market cap terms above Facebook.
The value of each network is different for a single user. Eventually, if Ethereum reaches a billion users, its network valuation will be several times higher than that of Facebook.
Ethereum has to solve the scalability issues, otherwise, it cannot outperform the competition, and eventually, it will start declining in investing interest.
Networks require to run smoothly and execute each command instantly. Networks that are not lightning-fast today create problems in the price performance of the asset. Eventually, networks that are not offering the perfect user experience will fail to become widely adopted.
BTC is not performing either as a network. It is slow and expensive to use. And when too many people use it, fees reach some kind of astronomical level of $50 per transaction.
We don’t care about that though; we are here to invest, aren’t we?
A gross mistake since the fees rising means that the network is enjoying increased usage, but also means that this network is a failure.
Staying away from crypto is the worst mistake an investor can make.
This industry today is not about BTC anymore. Networks like Bitcoin Cash, Ethereum, ZCash, XRP, Cardano, and hundreds of more, are not just creating some vague “store of value” narrative to invest into.
These networks are creating the future of finance.
Bitcoin Cash has a top-tier blockchain. Fast, cheap to use, and reliable, exactly as Bitcoin should be. It covers these features that should have been the basics and where BTC failed massively.
Ethereum has infinite possibilities, and developers create new decentralized financial instruments daily on top of it.
Sadly though, the whole cryptocurrency industry is still bound by the restraints of one only asset, Bitcoin BTC, rejecting innovation and utility.
BTC, with its boom-bust cycles, is not helping with stability, and with the extreme price fluctuations, it creates even worse conditions for the sustainability of other cryptocurrencies.
Eventually, this will change, but first investors should change their habits and their sources of information. It needs to put the importance of the cryptocurrency industry on a higher level and retail, as well as institutional investors, start behaving rationally.
Memes like Doge will not survive, its network standards are outdated (was never an innovative technology) and sadly Elon Musk has purposely created a destitute image for the whole industry.
When you should buy crypto, it is a choice you should be making. The timing is important since the market and exchange mechanisms have tied all cryptocurrencies to BTC.
I will not advise buying Ethereum at $3000 since it can easily drop to $300 again in case we enter a bear market. I am not even going to advise when to buy.
With this article, I try to make sense of this market, analyze its flaws and its advantages, and how important it is for investors to change into a mature mindset.