Bitcoin dropped another 10% just today. After it lost almost 40% over last 12 days. Perfect moment to buy? Isn’t the rational investor buying when everyone is selling?
Full disclosure: I never had bitcoin and I’m not a big fan. But here it’s not about whether I like BTC or not. I’m putting sympathies and antipathies aside and instead consider market situation.
If you bought BTC two weeks ago, you may be feeling depressed. It is hard to face the loss. Many remain in the “hope” wonderland. “What if it turns around?”. But for the effective investment decision, yesterday is as relevant as last winter’s snow. What matters is the future and only that. And the bitcoin’s future is not looking good to me.
It is a natural instinct of great investors to buy when people panic. The panic is this rare moment when irrationality is out there in plain sight. And at that brief moment you can buy shares of great companies at attractive prices.
What’s different about Bitcoin? There is no attractive price for it. Why? Because there is no reasonable price anybody could name. There is no valuation method that makes sense. The current price is just how much the last buyer paid for it. The problem with this valuation method is that the guy who bought bitcoin from you yesterday could not be there for you tomorrow. Why?
As we mentioned before, Bitcoin is just a pyramid scheme. When pyramid scheme falls apart, it is a rapid fall. But BTC is not a normal pyramid scheme. It is a digital pyramid scheme. It makes the outflows and declines even faster.
If you’ve joint the pyramid scheme late and lost some money already, it’s good to know there is one thing worse than joining too late. It’s leaving too late. Wait, hasn’t BTC dropped before? Hasn’t it recovered so many times? Absolutely! There is no denying, and it may happen again. To me this time the chance is just too low, and he chance of loosing it all outweighs it greatly.
What’s different now is authorities get serious about restraining BTC mining and trading. Make no mistake, it’s not only Chinese authorities. There is no government in the world that is happy about loosing influence over it’s monetary base. With recovery climate getting better, it gets more likely other governments follow suit.
In the end, you decide. This is not an investment advice and the views here are of the author and the author only. If they are similar to the views of any other person or institution, that’s by pure coincidence.
Updates:
2021-05-23 15:30 GMT: Two days since writing this post BTC has dropped another 10%
2021-05-25 20:06 GMT: Two days later, bitcoin is falling by 5% again, though it did rebound strongly (15%) following Ray Dalio’s comment stating he prefers Bitcoin over bonds
