Parabolic price movement requires some out of the box thinking. A lot of traders wanting to call a top are typically burned and end up buying back at higher levels. While I would encourage profit taking consistent with your risk tolerance, I wouldn't encourage trying to time "the big short"
Did the price of Bitcoin go up extremely fast? Yes
Is it overvalued? Probably, but who knows
When will it correct? Nobody knows
Many claim to have a crystal ball and support their theories with pretty chart art but the vast majority are liquidated several times in the process from being over-levered and overconfident that "today will be the day the market corrects"
The first rule of trading bubble-like environments is to never try and call the top.
Bitcoin is either the greatest risk asset in history or the greatest inflation hedge. The macro environment right now is supportive of higher prices for risk assets. Typical measures of inflation (imo) have failed to capture the real cost of inflation that is felt by participants of the real economy, investors and savers are turning to Bitcoin and other digital-assets to protect their purchasing power. This is resulting in further adoption of cryptocurrencies which were, in the past, typically seen as an alternative asset class. Cryptocurrencies are no longer being ignored in asset allocation and are becoming a staple of long term investors portfolios. For example, Goldman Sachs reported recently that +40% of their clients reported having exposure to the asset class (source below).
What remains to be seen in the coming months/years is if the institutional adoption will keep pace with public adoption.
Further, the flood of money into the financial system has boosted liquidity for all markets. As the saying goes, "rising tides lift all ships." In short, without being too technical, investors and households are raising cash (dollars, euros, yen, etc.) at an unprecedented rate. That money needs to go somewhere. In the era of low bond yields investors are scratching their heads about where to park cash, and many are looking for alternatives (ahem bitcoin). For the retail investor and the corporate treasurer, options are limited. The new buyers of crypto currency aren't the traders of old (2017 and prior) and plan to hold the asset as long as they need to reap long term rewards. Institutions have an even longer time horizon of some 10-50 years. Panic selling is becoming less and less of a market phenomenon in my opinion for two reasons:
1. Access to information is the best its ever been
2. Institutions and Households with disposable income (typical investors) have financing resources that weren't available in the past (think near 0% borrowing rates)
People sell what they can sell, not what they want to sell...you may see this trend continue unless there is a meaningful catalyst like war, adverse regulation, etc. Many will argue "what happened in March 2020?" I would respond that March 2020 was a liquidity crisis and a scramble to raise cash, so they sold liquid instruments like Bitcoin to meet other financial obligations (for ex. margin calls).
There are many reasons not listed here and many technical nuances that we can discuss, but this is a quick summary of the thought process behind a long-term bullish outlook for Bitcoin and other digital assets.
Full disclosure: I am in a long position with a cost basis considerably lower than the current price at time of writing so I am comfortable adding to my position on any significant price decline.
Source for GS comment: www.coindesk.com/40-...ure-to-crypto-survey
Did the price of Bitcoin go up extremely fast? Yes
Is it overvalued? Probably, but who knows
When will it correct? Nobody knows
Many claim to have a crystal ball and support their theories with pretty chart art but the vast majority are liquidated several times in the process from being over-levered and overconfident that "today will be the day the market corrects"
The first rule of trading bubble-like environments is to never try and call the top.
Bitcoin is either the greatest risk asset in history or the greatest inflation hedge. The macro environment right now is supportive of higher prices for risk assets. Typical measures of inflation (imo) have failed to capture the real cost of inflation that is felt by participants of the real economy, investors and savers are turning to Bitcoin and other digital-assets to protect their purchasing power. This is resulting in further adoption of cryptocurrencies which were, in the past, typically seen as an alternative asset class. Cryptocurrencies are no longer being ignored in asset allocation and are becoming a staple of long term investors portfolios. For example, Goldman Sachs reported recently that +40% of their clients reported having exposure to the asset class (source below).
What remains to be seen in the coming months/years is if the institutional adoption will keep pace with public adoption.
Further, the flood of money into the financial system has boosted liquidity for all markets. As the saying goes, "rising tides lift all ships." In short, without being too technical, investors and households are raising cash (dollars, euros, yen, etc.) at an unprecedented rate. That money needs to go somewhere. In the era of low bond yields investors are scratching their heads about where to park cash, and many are looking for alternatives (ahem bitcoin). For the retail investor and the corporate treasurer, options are limited. The new buyers of crypto currency aren't the traders of old (2017 and prior) and plan to hold the asset as long as they need to reap long term rewards. Institutions have an even longer time horizon of some 10-50 years. Panic selling is becoming less and less of a market phenomenon in my opinion for two reasons:
1. Access to information is the best its ever been
2. Institutions and Households with disposable income (typical investors) have financing resources that weren't available in the past (think near 0% borrowing rates)
People sell what they can sell, not what they want to sell...you may see this trend continue unless there is a meaningful catalyst like war, adverse regulation, etc. Many will argue "what happened in March 2020?" I would respond that March 2020 was a liquidity crisis and a scramble to raise cash, so they sold liquid instruments like Bitcoin to meet other financial obligations (for ex. margin calls).
There are many reasons not listed here and many technical nuances that we can discuss, but this is a quick summary of the thought process behind a long-term bullish outlook for Bitcoin and other digital assets.
Full disclosure: I am in a long position with a cost basis considerably lower than the current price at time of writing so I am comfortable adding to my position on any significant price decline.
Source for GS comment: www.coindesk.com/40-...ure-to-crypto-survey
Trade closed: target reached:
This was a good one 👍