2021.09 - Parabolic
TLDR:
I understand if you are nervous about investing in Bitcoin. It’s confusing, looks like a Ponzi (it’s not) and has already gone up almost 10x in the past 12 months. How much higher could it go? You’ve probably never experienced an asset going parabolic. Get in, buckle up and start studying.
THE STANCE
My personal opinion on where the ball might be heading.
Just got the question again:
What price should I be targeting for my first buy?
Here’s the answer: Just buy some at whatever the heck the price is at the moment. You’ll never like the price. I’ve had friends who have been “waiting for the right price” since $6k (I wish I was kidding). It’s always either “gone up too much”, “gone down too much” or “not really doing anything”.
The real issue is that You don’t have conviction in the asset yet. That’s entirely normal but here’s the thing: you can’t build much conviction from the outside looking in. You need to get in the game by buying enough to make it real for you. Enough to force yourself to pay attention to it. Enough to make it worth your while to put in the effort —and believe me, it will take effort— to understand what the hell Bitcoin is, how it works and why it behaves like it does.
So, how does Bitcoin behave?
In the past Bitcoin has had parabolic advances the year after each halving (the latest halving was last year):
There is of course, no guarantee that history will repeat itself. But the current macroeconomic conditions (money printer go brrrrr) seems to be driving an appetite —from individuals and institutions— for assets that the government can’t simply inflate.
Add to this a measurably historic outflow of coins from exchanges:
We can’t know what percentage of these coins are headed for cold-storage, but it’s reasonable to assume that a good portion of these are being taken out of the market for a while.
Growing demand + dwindling supply = price appreciation.
The specifics of when it will happen and by how much prices will increase are unknown, but the large-scale mechanics of the process are completely visible and suggest to me that we will be seeing more fireworks this year, maybe even soon if corporate earning reports bring some exciting news to the space.
Fair warning: the best way of looking at Bitcoin is as a long-term savings account. If you are looking to get rich quick it will likely lead to pain and losses, you have to build up your understanding and conviction in order to stomach the downs AND the ups.
So, how much should I buy?
This is a very common and important question. Once you decide you’re going in you need to determine a position size that makes sense for you. Invest too much and your nerves will be shot. Invest too little and you’ll have missed a unique opportunity.
After your first investment, you should keep use DCA (Dollar Cost Averaging) as an accumulation strategy; you set aside a portion of your income to buy a fixed amount at regular intervals.
For your initial investment, I recommend simple strategy I call “Thank Me Later”. I’ll be emailing it to my subscribers this Wednesday. You can sign up here to get your free copy.
LONG BITCOIN
Recent news that keeps me bullish on Bitcoin —"long / bullish" means you have the expectation something will rise in value.
Tipping Point
Citibank is more bullish than you.
NYDIG Unchained
Two firms with excellent reputations in the Bitcoin space are joining forces, I look forward to seeing what comes of it.
Paypal Buys Curv
Paypal is deepening its inroads into the crypto-space via the acquisition of custodian Curv
While I don’t recommend using PayPal to buy Bitcoin (they don’t allow you to withdraw your coins to your own wallet) their size and influence is indisputable.
Their acquisition of Curv signals a commitment to the space which will help build confidence and drive adoption. I hope we will see PayPal continuing to bake Bitcoin into their payment rails.
CRYPTO WARS
crypto- | ˈˌkrɪpˌtoʊ | concealed; secret.
The monopoly over fiat money will not be given up without a fight.
Iranian Bitcoin
The government of Iran has been flirting with Bitcoin for months. There are reports that they own tens of thousands of miners which they power at least in part with their nuclear power energy sources while cracking down on private miners.
A recent report from a think-tank with government ties is encouraging Bitcoin mining as a source of revenue and potentially a way to avoid US sanctions:
Is this good?
That is the wrong question. The right question is: can anyone stop them? the answer to which —barring a war which leads to the actual destruction of the miners and power plants— is no.
Beyond judgements of good and bad, here the power of Bitcoin is laid bare.It is permisionless and uncensorable. Anyone who wants to participate can (earning it the title of “money for enemies”).
Those countries that understand this and take action before others will acquire an edge in a global race that —though many refuse to acknowledge it— has already started. Tick tock.
SHORT FIAT
Recent news that makes me bearish on the legacy financial system —"short / bearish" means betting it will go down in value.
Broken Bonds
I won’t pretend I understand the bond markets, but people who do are concerned:
I will be keeping an eye on this, if you’d like to understand what’s going on a little better I found the following resources useful:
This podcast with John Vallis and Greg Foss does a great job putting the situation in context:
PS. If you need a quick 101-primer on Bonds, The Fed, Money Printing, related Macro-stuff, this conversation between NLW and Kevin Kelly is a great place to get started:
PRICE DISCOVERY
This is the section where I talk about price with an updated weekly price chart. If this is your first time here, there’s a “how to interpret” guide below the chart.
Hanging around 50
After “jumping off the board” two weeks ago, Bitcoin came back down and seems to have “landed back on the board” nicely (found support around $45k) and seems on solid footing at $50k.
The longer we stay at $50k the more strength Bitcoin will gather to jump up again, perhaps managing to break past $60k next time.
With corporate reports coming out this week, I would not be surprised if we see some fireworks.
Each candle in the chart represents one week.
How to interpret the Bitcoin Surfing chart:
Think of Bitcoin's price-action as a kite-surfer:
Bitcoin uses its board to stay above water and wants to catch some air.
When it catches air, it tends to keep rising but if it rises too fast (it's feet no longer touch the board) it can stumble.
If it falls off the board, it tends to keep falling until it regains its footing (may need to touch water or sand for that).
Water and sand arrest the fall and help it push itself back up.
If it goes up so much that it gets close to (or into) the Stratosphere, it will probably crash down all the way into the sand and may need to tap the bedrock level before pushing up again.
