I’m a buy and holder (a HODL) of cryptocurrencies.
I don’t use leverage.
I buy the underlying asset and I hold it.
I don’t trade in and out of crypto.
This means that I don’t look at the price on a daily basis.
I hadn’t looked at Bitcoin’s price since early October when it was in the early USD 4,000s.
I looked two day ago and it had breached USD 5,500.
This really is a wonderful journey.
What other financial instrument do you know that is this volatile?!
I’m happy that it’s gone up but I wish that it had held at the lower level for a while longer. I haven’t finished buying enough of what I want yet. It looks like the price is going to keep getting away from me so all I can do is follow my own advice and dollar cost average my Bitcoin buys.
Three questions to ask yourself when considering whether it’s too late to buy in at this price
1) What could push the price lower than this price in the future?
- Destructive forks
- Other coins winning the battle for cryptocurrency dominance (assuming that only one can win)
- A serious problem with the code that hasn’t been discovered yet
- A massive hack to a major exchange like Coinbase
- An inability to scale Bitcoin on the current blockchain
2) What is the potential upside?
It’s a limited supply resource. There’ll only ever be 21m Bitcoins. But people are waking up to it and more people want in. And even now, it’s not easy to buy and store Bitcoin.
This demand has already taken BTC from USD 800 in Jan 2017 to USD 5,500 in Oct 2017.
It could get to USD 10,000 by the end of 2017. Why not?
It could get to USD 50,000 by the end of 2018. Why not?
If the normal man on the street wants some Bitcoin, why couldn’t the demand massively exceed supply? In which case, it could get to absolutely crazy numbers. Crazy good for holders (HODLs).
3) What is the likelihood of achieving this potential upside?
Anyone who says they’re sure it’s going to go wildly up or crash to zero is chatting bullshit.
The wisest man in the room knows that he doesn’t know.
All you can do is to position yourself correctly for each eventuality and weight your position to lean towards the outcome you favour. Edmond Chan Oct 2017 🙂
For me, that means not betting more than I can afford to lose but betting enough that the pay-off becomes life-changingly meaningful.
My friends ask me now, is it too late at these levels? I say that it might look toppy but you’ve got to be in it to win it. I’m still buying. (Obviously the usual disclaimers apply. Do your own research before risking any money.)