Metacoin

Covering Bitcoin, the Blockchain, Altcoins, and Fintech

dollar cost averaging

Loving Bitcoin in the Time of Coronavirus

Gabriel Garcia Marquez wrote Love in the Time of Cholera in 1985; it’s a book whose title format will be used and overused during the next several months. We shall do the same here, in the interest of being clever, of course, but also because it does lead us to a question that needs to be asked.

(It should also be noted that I have never read this book but I do remember that it figured prominently in the film “Serendipity.”)

Here, the question at hand:

“Should you love Bitcoin with *everything* that’s going on?”

And that leads us to another question:

“Why love an asset now if it’s probably going to drop by 50% or more in the next couple months anyway?”

Good questions, these. Let’s dive in.

They do look delicious, though.

ONE THING BEFORE WE PROCEED: Sites like these rely in no small part on AFFILIATE LINKS — and, given the goofiness that’s out there, if you’re so inclined, folks like us appreciate the assistance.

  • Here’s an AFFILIATE LINK to Crypto.com <— we can get compensated if you sign up for an account and make a qualifying purchase.
  • And here’s an AFFILIATE LINK for Coinbase, same deal there.
  • 3HqMK9T2Xzy6CnLeJ5sx1xDgGcqz4Qtmj6 <— that’s our BTC address if you want to send a tip.

Loving Bitcoin…But at a Distance

Here’s a theory: the ride will continue to be wild as heck, based mostly on the fact that Bitcoin is an unproven asset.

Most investment professionals we’re following are looking for analogous events to try to figure out what might happen next. Two examples that come up the most often — remember the cognitive biases, though, that are driving people’s thinking here — are the Financial Crisis of 2008-09 and Sept. 11, 2001.

If you follow that financial markets got worse, then much worse, then better right after that, then you can apply this same logic to Bitcoin (which we’ll use broadly as an example of the crypto markets).

So, let’s look at the 52 weeks that just passed for some price history — this will give us at least a basis for making some sort of prediction.

Bitcoin price chart from past year
The Year That Was

Let’s assume this was an average year for Bitcoin: wild swings and a price that tripled in less than four months, then dropped back to Earth, then dropped even more, and is now at near its 52-week low. And this was with nothing really crazy going on in the world: no financial crises, no major shocking events like Sept. 11, and certainly no global pandemic.

When *I* look at the chart, and being totally honest (and paranoid) here, I look at the high from July and where we are today; then I assume that today is going to be the 52-week high for the next 52 weeks.

That’s Right. I Could See a Huge Drop.

If you do the math on my little theory, here’s what that means: a drop of 60.5% (from $13,073.24 to $5163.92), or all the way to $2039.75.

I’m not alone: one foreign friend who takes advantage of Bitcoin options trading has loaded up the “stink bids” that will profit from huge price drops. (I can’t trade Bitcoin options since I’m an American.)

But Why the Drop? Shouldn’t It Just Be a Bull Market from Here?

I honestly don’t think so…

  • We’re in completely uncharted territory
  • The US is considering sending every American adult a check for $1000
  • And the average American is going to use that on things like food, the mortgage, rent, car payments, diapers…you name it.

BUT if you’re already in the game, here’s a recommendation — NOT FINANCIAL ADVICE, DO YOUR OWN RESEARCH, NOT RESPONSIBLE FOR FUTURE SUCCESS OR FAILURE — to do the dollar-cost-averaging thing.

Wait, a Bitcoin “Pundit” Saying We’ll See a Price Drop?

Yes. That’s what I think. Uncertainty, coupled with an un-tested asset that isn’t yet “digital gold,” and we’re in for a bumpy ride.

Et Tu, Crypto?

It’s March 15, 2020. I’m trying to answer a whole host of questions. Some are serious:

  • Are we going to stay away from this virus?
  • How will bloggers, writers, and entrepreneurs like me make a slowdown work financially?

Some are less than serious:

  • What is the best recipe for a “Quarantini?”
  • And what about a “Cryptotini?”
Glass of mysterious alcohol, plus an orange peel, and some ice.
“Just throw some liquor, an orange, and few ice cubes in a glass…and hope for the best.”

But, in the spirit of this blog (“making sense of crypto” is kinda the mantra), the questions we’ll ask today — and attempt to answer — are all Bitcoin and crypto in nature. Here goes:

Have We Hit “Bitcoin Bottom?”

Price swings in Bitcoin from March 12.
It wasn’t THAT bad, was it?

Well, to answer the question in the caption, it WAS that bad. Like REALLY bad, actually. THAT IS A 43.3% DROP.

But to answer the bigger question…

Nobody knows. $4185.21 might appear to be a bottom — FOR NOW — because, as of this writing, we’re at $5373.35. We’re bouncing around in the $5100-$5500 range for the past day. There’s some stability. But there’s also that “flight to safety” question that we asked forever ago: Is Bitcoin Digital Gold? (And yeah, forever ago was two weeks back.)

Is What’s Happening Outside Really Impacting Crypto Prices?

One theory — not my theory, had been espoused elsewhere, most notably by vagabond entrepreneur and crisis investor Doug Casey — is that prices aren’t impacted by anything other than rogue traders (Chinese? North Koreans? Both?) who are dumping their ill-gotten gains for cash.

Another theory — probably works in parallel to the above — is that whales are using the drop to dump their Bitcoin and Ethereum on unsuspecting noobs. Then they’ll buy the same coins back at lower prices, with a plan to lather, rinse, and repeat as the days go by. (And as people get less and less certain of what’s to come.)

What’s a Crypto Investor — or ANY Investor — to Do?

Hey, here’s where we can go back to the basics. And these basics make sense for ANY investment — you are entering an uncertain time. You don’t know what will happen next, none of us do, and that’s okay. Consider the following as advice that is worth the paper it is printed on.

  1. Remain calm. It’s a dog-eat-dog world out there — and, if you’re Norm Peterson from Cheers, you’re wearing Milk-Bone underwear — and having a steady hand is going to help a ton.
  2. Assess where you are and where you’re going. Some may need money immediately and don’t have time to play the game of market timing (as has been said often, nobody rings a bell when you hit the bottom). Some may have a little extra to set aside for crypto projects. It all depends on where you plan on being in a month, in six months, in six years.
  3. And, if you can, play the long game. We wrote about that a while ago and we’re still there: playing the long game is going to get you farther than anything else.

Links to Help You…

These are of course AFFILIATE LINKS and if you use them to open an account and make a qualifying purchase, we’ll get a commission. But two long-game tools we’ve been using are…

  1. Coinbase. Dave’s Affiliate Link. They have recently started letting you make regular purchases to “dollar-cost average” your way into crypto. 50 bucks or so, a couple times a month might be all you need to get your feet wet.
  2. Crypto.com. Dave’s Affiliate Link. We have more in this account of late than in our Coinbase account, partly because of the nifty debit card option.

In any event — prices up, prices down, rock bottom, Moon, etc. — we’re here to help. Stay Sanitized.