Thanksgiving week was a satisfying week to have a Coinbase account. You wake up from your turkey hangover Friday, check Coinbase, you see that Bitcoin is up by about $500 (you made a couple grand!), you smile.
Saturday, wake up, check Coinbase, Bitcoin is up another $500, success. Sunday, to your disbelief Bitcoin is up ANOTHER $500, and you’ve yet again made several grand!
If the above story is familiar to you, you probably had the same feeling I had. “Damn, I should have a put a couple more grand into Bitcoin a few weeks ago.” And that is exactly the kind of momentum that is driving Bitcoin higher, and higher, and higher, at what has alarmingly become a near parabolic rate.
Yes, Bitcoin has engendered another round of “FOMO”, or Fear of Missing Out. As one man brags to his mates about the $5K he made in a week, he inspires 2 of them to open their own Coinbase accounts, for fear of missing out even more. The original man, pleased with himself and feeling self-assured in his “skills”, decided to put more money into his Coinbase account. “After all” he says to himself, “what interest rate are they offering me in the bank? Nothing!”
To quantify what is happening, Bitcoin is sitting at $9,560 a coin as of this writing. Last week’s rally saw gains of $1,364 a coin, last month BTC rallied by $3,814 a coin, and the year’s overall gain is $8,827 a coin. Economic historians can be forgiven if an image like this comes to their minds.
But are Bitcoins the new tulip bulbs? That remains to be seen. 1,213.16% growth in a year is insane. So now the million dollar question is: Can Bitcoin back it up?
Well, if you ask the experts, the answer is “Absolutely Yes!” and “Absolutely No!”. There is such a wide gulf of opinion on this topic that, as far as I’ve seen, there are virtually no moderate opinions and analysis out there in the mainstream business media. John Mcafee thinks that Bitcoin will go over $500,000 per coin. Charlie Bilello, director of research at Pension Partners, pointed out that the market capitalization of Bitcoin has surpassed that of Disney. Jamie Dimon, Chief Executive Officer of JPMorgan, has decided Bitcoin is a “fraud” and publicly declared he would fire any employee trading Bitcoin for being stupid.
So what does the good-intentioned investor looking to make a play make out of all of this? I’ll start with a good piece of general advice: Follow the Money. John Mcafee currently runs an enormous cryptocurrency mining company. Of course he is bullish. Jamie Dimon is the Chief Executive Officer of a major global banking conglomerate. In a world with ubiquitous Bitcoin transactions, the old, slow, heavily regulated banks would have a very hard time dominating the playing field like they do with transactions in USD. Of COURSE he is going to say that Bitcoin could never work; never forget that Blockbuster laughed off a partnership with Netflix (back when that first company was relevant.)
Back when I wrote my first article about Bitcoin in June, I said that if you can bear some pretty enormous risks, you MAY see some pretty outrageous returns. I said that “investing in Bitcoin is accepting that you are putting money into an essentially worthless currency that exists only online, and that you may lose every dollar you put in.” I said that if you choose to invest, put in an amount that you could afford to lose (completely), and to dollar cost average, to smooth out some of this wild volatility and get the best buy-in price. I shared with the world at large that in researching my first article, I had decided to invest in Bitcoin, the same amount every month.
I am pleased to see that I was right. The Bitcoin investor has seem some wild risks and some equally wild returns in the span of those months. To those of my readers who missed out, I am sure your question is “What about me? What should I do? Is it too late to buy in?”
I would make one major change to my strategy. I would still be extremely cautious, especially if I were older and had anything other than an extremely aggressive risk tolerance. I would still only put in what I can afford to lose, and I would still dollar cost average every month or so. At these prices and valuations, the major change to my strategy would be BTFD. BTFD is slang in the financial world for “Buy The Freaking Dip”. I think the reality of Bitcoin is somewhere between Mcafee’s vision and Dimon’s (gee helpful I know). I think Bitcoin IS a good idea, but I also know from experience that it IS possible to overpay for a good idea! You don’t have to be a Jamie Dimon to recognize that a major correction in Bitcoin is very possible in the near future. And you don’t have to be a Mcafee to imagine a world in which Bitcoin breaches $10,000 a coin, and soars higher. One last word of caution, as I mentioned in my last article, an Armageddon-level event is still in the cards. ICO’s (Initial Coin Offerings) are happening every day, and the vast, vast majority are scams. These HAVE to burst. And when they do, Bitcoin and the other significant players WILL feel the impact. As I stated before, I think BTC and ~5-10 major coins will survive. And when that day comes, I intend to BTFD.
If you are interested in investing in Bitcoin/other high profile investments but lack the confidence or expertise necessary, I encourage you to contact myself or my partners. We’ll be happy to guide you along the way.