When I Buy Bitcoin
$30k test, market analysis, the larger narrative, and my buying strategy.
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Crypto market sentiment and my take.
$30,000 IS BEING TESTED. The crypto markets fell Monday… along with traditional markets. Why the dip? In traditional markets, there’s concerns around the delta variant and a rise in Covid cases. This could slow economic growth and the “reopening” economy. That said, U.S. markets remain up nearly 100% from March 2020 lows. So what about Bitcoin?
BITCOIN FAILS RECENT TESTS. Bitcoin has failed to breakout above either the wider or tighter price ranges I’ve been watching. It found resistance at both levels.
For more insight, read the latest paid email. I’ll mention the price ranges below. Note that we’re approaching $30k as of Monday.
THE LARGER NARRATIVE remains the same. While volatility and trading volume have decreased in recent weeks, the long term value propositions for Bitcoin are unchanged. Bitcoin has steadily traded down to the lower end of the $30,000-38,000 price range BUT:
Institutional Interest Is Strong
Miners Are Accumulating
Whales Are NOT Selling
FOLLOW THE MONEY. BlackRock is the largest asset manager in the world. Last week, CEO Larry Fink said that they “see very little in terms of investor demand” for cryptocurrencies. Fink said this despite the fact that BlackRock owns a 15% stake in MicroStrategy. They’ve also been investing in Bitcoin since February of this year.
BANK OF AMERICA is opening their doors to Bitcoin futures trading. This is on the heels of others such as Goldman Sachs and Morgan Stanley offering Bitcoin exposure to their clients. The point is that institutional demand does exist and is only getting stronger. Don’t let a drop in trading volume or offhand comments from Fink fool you. Crypto markets are becoming more and more mainstream every week.
THE BULL CASE FOR BITCOIN is still there—nothing’s changed. Zoom out and you see the Bitcoin user base is growing. Plus, all other contributing factors that encourage Bitcoin adoption are only getting stronger. The on-ramps to Bitcoin are being established and a stressed global economic system continues to advertise Bitcoin to those seeking an alternative.
U.S. Dollar Debasement
Bitcoin as a Store of Wealth
Supply v Demand Case
More Bitcoin Education
More Retail Adoption
More Institutional Adoption
Hedge Against a Stressed System
When I Buy Bitcoin
When do you buy Bitcoin?
I DON’T TRADE BITCOIN. I’ve said this many times. I buy Bitcoin with the intention of holding long term (possibly forever).
I MINE ETHEREUM AND RAVENCOIN. I’m still mining Ethereum for as long as is possible given the transition away from mining to proof-of-stake via ETH 2.0. For now, Ethereum mining remains profitable. Mining rewards are my primary source for any net-new Bitcoin positions.
I look for optimal ratios between the price of Bitcoin and the price of Ethereum then convert ETH to BTC.
I’m currently holding my Ravencoin mining rewards with the expectation that Ravencoin may increase more in price in relation to Ethereum within a 6-12 month time period. This is a calculated hedge that GPU miners like myself will move their equipment over to Ravencoin enough to increase the network significantly. The next few months are critical for crypto mining.
DOLLAR COST AVERAGE (DCA)—when I have bought Bitcoin, especially during this current market cycle, it’s been done via dollar cost averaging. Put simply—you spread your total investment out over time to reduce the impact of volatility and to potentially keep your cost basis low.
It’s an easy way to take the pressure off any one trade. Even in a sideways market, dollar cost averaging puts my mind at ease. You can setup recurring buys on most exchanges or crypto wallets.
When I Buy Bitcoin:
I’ve also used strategies like:
DCA buy any 5-7.5% 24hr dip
DCA Bi-weekly Buys
DCA Monthly Buys
These are all strategies I’ve used. They’re also just referencing the actual buying action, not the overall investment strategy. I don’t know your situation. I’m not a financial advisor. I know my situation though and I show paid subscribers my crypto buys/sells and holdings. In general, I…
start with a fixed amount to invest
establish a long term strategy
determine the position I want
spread the $ over several buys
Even though Bitcoin has been trading sideways and down closer to $30,000, I haven’t made any substantial buys in the last few weeks. Instead, I’ve been focusing my investing efforts on rebalancing positions in my Roth IRA and adding funds to other traditional investments.
Ethereum mining has also been surprisingly profitable so I’ve felt comfortable simply allowing my ETH holdings to accumulate with the expectation that those rewards will be fresh capital to deploy into Bitcoin in the near future.
What to Watch
Where does Bitcoin go next?
THE PRICE LEVEL I’M WATCHING… $30,000. If that breaks, look to see whether or not $28,000 provides support.
There’s also talk of the unlocking of shares in the Grayscale Bitcoin Trust being a catalyst for the downswing. I’d attribute the move more to action in the global markets so what those markets do this week is key.
A MOVE TO $33,000 would signal strength and from there I’d look at both $35,000 and $38,000.
I’ve been talking about a $30k test since the start of June—it’s here.
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