The Boring Days of Bitcoin
If there is one thing that I have said the most during the last year, it is that we are living in scary or unprecedented times. Especially in the financial markets. If you have been paying attention, you will have been able to sense an extreme amount of tension in these atmospheres. People are certain that the market is about to see an extreme downturn, and that it will be happening very soon. In anticipation of this, these people have been preparing by doing one of the following. They panicked and decided to sell out of the market. Or, they are waiting in cash hoping to take advantage of the potential once-in-a-lifetime buying opportunity that most feel is on the horizon. Whatever people have decided to do, they are now waiting and watching. One thing is for certain; when the market finally decides what it wants to do. It will do it very swiftly.
Now how does this relate to Bitcoin, Ethereum, and the whole crypto market? It has everything to do with it. But before we get to that point, we need to discuss the current state of the crypto market. We are currently in the doldrums of basically nothing happening. Since the collapse of Celsius, 3AC, and so on, nothing has been happening in the crypto market. We are essentially in the same place price-wise. The market has become pretty born. From the time I wake up until the time I go to bed, sometimes the price is nearly identical. Believe it or not, the worst thing for crypto adoption isn't prices rising so fast that people can't afford to buy coins, or dropping incredibly hard causing people to go broke. But, it is actually when the market is doing nothing at all. When the market is boring. When prices go up, people become excited and FOMO into the market. When prices drop, people often see it as an opportunity to get great value and build their portfolios. However, when prices are boring, people just lose interest and go to do other things.
The last few months have reminded me of previous periods when Bitcoin wasn't doing anything. Towards the end of 2018, the fall of 2019, and the spring of 2020. During all of those periods, Bitcoin wasn't doing anything price-wise and people began to lose interest. This can even happen during both bull and bear cycles. As 2018 and 2019 would have been during bear cycles. While 2020 was during the beginning of the bull cycle. The interesting thing is that there is a lot of advice out there on how to invest while prices are moving. For example, when prices are green and potentially overvalued, don't buy. When prices are down greatly, that is a great opportunity to load up the truck and buy assets. But, what should you do when the price isn't moving?
Outside of those once-in-a-lifetime dip buying opportunities. I would argue that boring days are the best times to buy and build out your portfolio. That is exactly what I was able to do during those periods above. It wasn't always easy. Similar to when prices are moving down, it can sometimes be difficult to maintain conviction in what you're buying when it isn't doing anything. Especially crypto assets. Buying Bitcoin at $3,200 during the boring days of 2018 looks like an incredible opportunity today. Ethereum was less than $100 at that time as well. Even during 2020's doldrum period that were great opportunities. Bitcoin was hovering from $9-11k. Ethereum was at $400 and the list goes on. DeFi summer was about to explode and all of those assets were incredibly cheap. NFTs were doing nothing and could have been had for pennies on the dollar. The point is that once you find great crypto asset investing opportunities. You should never stop buying. That is what makes the dollar-cost-averaging buying strategy so powerful. The funny thing is that more often than not, the biggest threat to us not making profits is ourselves. Humans are emotional, and we get spooked into selling too early, losing conviction, getting distracted or bored and the list goes on. Just set it and forget it. Treat it like any of your other expenses. Each paycheck, you have a "crypto expense" that is automatically debited buying you more crypto of your choice. All the while keeping some extra cash on the side to take advantage of those great dip buying opportunities.
Now onto the future DOOM scenario that is potentially about to play out in the financial markets. Things could become worse, and the world could become an ugly place. But, there is also a chance that it won't. If there is one thing that I have learned while investing. It is that financial markets often do the opposite of what most people are convinced they will do. In my situation, especially with crypto, it has been far more dangerous to sit out on the sideline, missing the largest price-moving days. Rather than waiting for that future potential great buying opportunity. It might happen, but it might not as well. As for me. I'm buying today, tomorrow, and the next day as well. If prices drop significantly, I will buy even more.
How about you? Are you waiting on the sideline for that potential ultimate buying opportunity? Or are you continuing to buy as normal?
As always, thank you for reading!
The biggest difficulty I have had with applying the usual investing principles to it, is that I don't necessarily believe one can apply the same principles to it. I say this mainly because crypto just doesn't really have the track record of so many other types of investments before it. Like the stock market, that is hundreds of years old and has only one real direction...up.
I have been mostly sitting on the sidelines, earning what I can, but still watching. I have actually been more interested as prices have sat still a bit, not really doing anything. Because it suggests to me that MAYBE that's a bottom, and there is still a chance that crypto can become something bigger.
But honestly, right now I just don't know. And as such I'd rather stick to things I know right now will actually have a potential upside...
Like the stock market.