As a seasoned crypto investor with a few battle scars from market volatility, I find myself pondering over the current state of Bitcoin and its potential impact on my investment strategy. I’ve been through multiple market cycles, witnessed the highs and lows, and learned that patience and long-term vision are key to reaping the rewards in this space.
It’s possible that some retail investors who own Bitcoin might consider selling due to the extended period of sideways and falling prices. These investors might not be in it for Bitcoin’s libertarian aspects, but rather as a speculative investment. If they decide to sell, they might struggle to find another suitable place to invest their funds, given current market conditions.
The decision to sell
You’ve invested a substantial amount of your savings in Bitcoin. The market is currently bearish, causing concern that the profits you’ve made might evaporate or that you’re holding onto potential losses which could worsen and push your investment further into negative territory. As a result, you choose to sell your holdings.
When you decide to cash out your Bitcoin, it’s essential to understand that you’re effectively opting to acquire traditional currencies such as dollars, euros, or pounds in exchange for it instead.
You really must step back and think this potential transaction through. You are going to swap the scarcest, and hardest asset on the planet into paper currencies, and this at a time when central banks across the world are on the brink of what could be the biggest currency printing spree in history.
Huge money printing on the way
To cover the interest on existing debts and extend their repayment schedule for future handling, it appears inevitable that substantial money-printing will occur, particularly in the case of the United States, given its status as the world’s largest debtor nation. The global economy is teetering on the brink of recession, having potentially already started in some countries.
As a researcher, I’ve observed an alarming trend: Consumers have collectively experienced a loss of approximately one-third of their purchasing power due to the impact of Covid-19. This is equivalent to a 33% reduction in their earnings and savings. In simpler terms, it’s as if I’ve had a third of my salary and savings taken away.
Are you seriously planning to cash out your Bitcoin and hold the funds as regular money? Or maybe you’re up-to-date on current events and aware that cash is like an ice cube, slowly melting due to debasement and inflation at a rate of about 15% per year in terms of purchasing power. Consequently, you might be considering using the fiat currency from the Bitcoin sale to invest in another asset instead.
What about buying alternative assets?
For the last few decades, a stocks and bonds portfolio was the way to go. However, this strategy has now bombed. Who wants to buy government debt in these uncertain times, and although stocks are still on the way up, aren’t they pretty much overvalued now?
Hard assets such as gold, silver, and real estate are certainly worth thinking about. At the very least, holding these assets will slow down the decrease in wealth caused by central banks debasing the currencies, but can the gains made with these assets match the 14% per year required to keep one’s head above water? Very unlikely.
Essentially, if you’re not already an accomplished investor who can find and purchase promising tech stocks capable of generating a return of at least 14%, and potentially more, then your investment options may be rather restricted.
A longer time horizon is crucial
Investing in Bitcoin generally depends on one’s investment timeline. If your goal is to quickly turn a profit within just a few weeks or months, then Bitcoin might not be suitable for such short-term strategies.
During past market surges (or bull cycles), it’s often the case that substantial profits from Bitcoin are accumulated within a week or two, rather than over the entire cycle. This implies that staying out of the market can be significantly riskier compared to being in it, and long-term holders generally reap significant rewards as they benefit from the overall increase in value across each cycle.
There is also the 4-year cycle to take into account. Typically, there are 3 years of bull market, followed by around a year of bear market. For some, watching Bitcoin make a potential 70% reversal during the bear market is just too much to stomach.
It’s the institutions that will end up with the lion’s share of Bitcoin
One potential rephrasing could be: “The challenge lies in the fact that everyday investors might need to sell their Bitcoins during market downturns due to financial obligations like bills and expenses. Consequently, it’s likely that institutions will accumulate a significant portion of the circulating Bitcoin.”
It’s unlikely that Satoshi Nakamoto, the creator of Bitcoin, envisioned this outcome when launching Bitcoin as an alternative to bank excesses and a monetary system based on fiat currencies, which have been detrimental to the lower and middle classes for a long time.
If you decide to sell your Bitcoins, that’s fine. Perhaps it can help alleviate any urgent financial obligations, and even better, provide a boost for your lifestyle. To those who are steadfast in their holdings, good luck and keep up the strength!
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2024-09-02 14:08