In case you’ve been living under a rock, you might not be aware of the tremendous recovery that Bitcoin has made in 2020. Being just one green wick away from its all-time high, it has made many people very interested.
Investors of all backgrounds buy Bitcoin in bulk, after witnessing numerous institutions hoarding up a large number of coins and placing them in cold storage. In many ways, the bull market we are experiencing right now has nothing in common with the latest one.
Why this bull market will be different
The bull run we are now experiencing in primarily fueled by institutions and corporations. The nearly 27% inflation of our economy in 2020 alone has led many people to seek refuge against a potential devaluation of their money. Do you find it hard to believe? Then have a look at the following tweetstorm:
<blockquote class=”twitter-tweet”><p lang=”en” dir=”ltr”>1/ HODL FOMO = Escape Velocity<br><br>The 2017 run was driven by short term retail and trader speculation, a fear of missing out on fiat gainz.<br><br>This run will be dominated by fear of missing out on adoption of bitcoin as a reserve asset, by individuals, corporations, and even nations.</p>— Brady Swenson (@CitizenBitcoin) <a href=”https://twitter.com/CitizenBitcoin/status/1327276810363670529?ref_src=twsrc%5Etfw”>November 13, 2020</a></blockquote> <script async src=”https://platform.twitter.com/widgets.js” charset=”utf-8″></script>
We are already undergoing the second wave of COVID19 lockdowns and there doesn’t seem to be a short-term solution in sight. In many ways, the most logical thing to assume is that the worst has yet to come. It is for that reason that institutional interest exceeds that of the average retail investors.
Take a look at the following graph as well. You can see, in detail, the price of Bitcoin correlated to the average number of articles mentioning the keyword “Bitcoin”. Where is the hype?
So is this a good thing? Investors swear that this is the best outcome they could expect since the actual surge of interest is yet to come. And while we are waiting for it, Bitcoin is casually breaking records when it comes to its price.
So when should I buy and sell my coins?
Let’s break this down into separate chapters and give some pointers for each one:
When to buy Bitcoin
Bitcoin experienced rapid growth over the past few weeks and many are expecting a retrace that could take it 20-30% below its current price. That being said, if you are interested in Bitcoin as a long-term investment, this shouldn’t be a reason to worry. Buying Bitcoin right now would most likely be a great idea if you are willing to risk the potential volatilities that come with it. In most cases, waiting for a dip is usually a process that ends up in long-term losses.
When to sell Bitcoin
Since this market cycle will be different, there will also be a different type of volatility as we enter unknown territories (market-wise). Many investors believe that the current HODL FOMO growth curve will not deflate as fast (or sharp) as the one we experienced in 2017. In fact, They expect this market cycle to imitate the early days of gold.
As such, when every experienced trader believes that it’s time to sell based on historical events, it might actually be a good idea to HODL. The best way to ensure that greed doesn’t get the best of you, however, is to set long-term goals. Once your portfolio reached a certain target, you can sell your funds gradually, or all at once.
Will another great “crypto winter” come eventually?
There are speculations as to what could eventually lead to another large price depreciation for Bitcoin. While most scenarios seem unlikely, we could see another 80%+ correction if:
- Bitcoin becomes too powerful and it becomes banned globally.
- Tether is found to be responsible for Bitcoin’s price manipulation.
- Bitcoin does not continue operating as planned.
- Governments intentionally buy up a large share of BTC to crash it in the open market.
We are yet to see the second wave of retail investors looking to make fast profits. At the time of this writing, the majority of BTC is bought and stored away by large institutional investors, who are slowly driving up global demand.
For that reason, it might be a good idea to get some Bitcoin as soon as possible and store it away safely. Once BTC’s market cap surpasses that of gold, we can expect the coin to maintain a rather stable growth pattern, with decreased levels of volatility. If that happens, there will not even be a reason to sell Bitcoin.