At what stage does it become Stupid to Buy Too Much Bitcoin?

 

This is a question which I am asking myself with increasing frequency, especially since the start of Q3 2019.

When I first started investing in crypto, I thought that I knew the answer: more than about 2% of your portfolio value in crypto is a bad idea.

I have been an adherent of the ” invest 1% of your net worth in crypto” principle. It makes sense: you’re putting in an affordable amount, an amount that you can lose without significantly disadvantaging your life, and an amount that is enough to significantly grow your wealth if BTC really takes off.

But now I am doubting that logic.

Reality has been hitting uncomfortably close to home this month. My portfolio value is growing, but only in my local currency.

I like a diverse portfolio, and mine is fairly diverse, but still rather traditional in construction. Over 50% of my investments are still sitting in an array of high-yield local fiat vehicles. 20 years ago this would have been a recipe for success – it’s most certainly how I was taught and what I was always advised to do. In fact, it’s still what financial advisers would recommend. The last time I consulted and invested through a finance professional was less than a year ago, and that’s still very much the tune that he was singing.

Perhaps because I am from Generation X it’s hard for me to think outside those terms. To me a cushion of growing fiat money still represents “safety”. I imagine that it’s possibly easier for younger people to think outside the traditional box in this regard, though the mainstream advice which they would be getting is probably much the same as what I get.

My crypto holdings have gained value this year (despite the bad altcoin market), my shares (which I streamlined mainly towards precious metals over the course of the last year) have done excellently and my physical precious metals holdings are finally waking up and making me money. Thanks to those, and some growth of my fiat, I have seen rapid growth of my wealth – but mainly in local terms. The sad truth is that with so much value in fiat, I am struggling to gain value in USD at all. As fast as I gain value in crypto and metals, my fiat depreciates against the dollar, and because I have most of my wealth in fiat, even a small depreciation costs me a lot.

I’ve grown my wealth by 20% in the last 6 months – in local currency, but only by 10% in USD. I know that sounds good (hell, most pro investors would kill for that), but I’m not happy with it, and here’s why:

Sitting with so much fiat I am very exposed to market fluctuations based on the political and economic situation of my home country and of the world in general. Two weeks ago my 10% USD gain was a 15% gain. I lost about 5% of my entire portfolio value (in USD) within two weeks – DESPITE climbs in crypto and precious metals. That’s a scary reminder of just how fast my portfolio can devalue. It also shows how the more volatile assets like crypto are not alone in their power to rapidly eat into the value of your portfolio when they turn bearish.

There is another consideration: The general trend of precious metals prices is an upwards one: they increase in value against USD. The general trend of my local currency is the exact opposite. Normally this doesn’t matter too much, as the interest I can gain on fiat holdings negates their devaluation and still makes me a small profit, but this is no longer the case.

At this stage you may wonder: “why not just transfer your fiat holdings into USD then?” Well, it’s inconvenient and a little costly to do so. I still need fiat for my daily transactions, so I still need a local fiat buffer. But the real reason is that USD doesn’t look healthy in the long-term either.

As many of us have been predicting for some time now, the economic house of cards that the world is built upon has become exceptionally fragile. It’s precariously balanced on a base made up of a trade war, a weakening and splitting European economic bloc, negative interest rates, quantitative easing and lending rate cuts, spiralling national debt which dwarfs GDP, and derivatives, derivatives and more derivatives. Options, futures, funds, shorts – everything BUT the underlying assets. The financial world is dealing in so many assets with zero inherent value, that the underlying assets themselves no longer even feature! And they have the gall to criticise crypto for having “no inherent value”…  (which I can prove is false)

The collapse of fiat structures is looking uncomfortable close, closer and possibly more severe than I even had imagined. At this stage I doubt that this will be the end of fiat as we know it. Unfortunately, this is all happening a little too early for crypto to just step in and pick up the slack, crypto adoption has not yet reached that level of mainstream use and trust. This means that fiat will rise again and that it will probably only be after the following big crash that crypto picks up the slack.

However…

It’s not to say that that following big crash won’t happen soon after the one which is about to happen. It’s hardly been a decade since the last semi-decent sized market crash. With another one already on the cards, it is clear that the entire shaky system is just rebuilding itself on its former ruins each time – thereby creating an increasingly shaky base – and consequently guaranteeing that each successive crash will not be too far off. In addition to this, each crash of fiat, its related markets and its plethora of derivative assets is another boost for cryptocurrencies.

Even mainstream investors can now see that Bitcoin is fast becoming a replacement for Gold, or at least an alternative to it. This is not to say that Bitcoin won’t dip in price when markets crash, but like most BTC dips, that will be a temporary one – a desperate rush out of stored value in order to try to prop up the failing fiat-based assets. It’s ludicrously stupid and doomed to fail, but it happens; just take a look at what happened to the prices of precious metals in 2008: Gold lost 30% of its value, Silver lost 60%, Platinum lost 67%. Admittedly most bounced back within a year – faster and harder than the stock markets did.

Don’t get me wrong, I still support investing in Gold (and other precious metals). My macroeconomic opinion of the 2008 crash was that it was more a correction than a crash. The problem with such a correction is that it delays the inevitable: the BIG crash will still happen – only now it’s going to be even more severe when it does. As I said earlier, I don’t know if what we’re seeing now is the start of such a crash, or perhaps just another mini-crash/correction.

Either way, I’m scared to still have so much money sitting in fiat. It’s only a matter of time before the American markets give that one big sneeze – the one from which all other markets will catch a cold – or perhaps a disease far more serious. Looking at my portfolio now, I can’t help but think that the assets which are generally seen as “risky” today, are probably more “safe”. For crypto this is still tricky to say: as much as I love crypto, I’m hesitant to throw more than the recommended 1% into it, 2% maximum. Thanks to the growth of crypto, I’m already way past that mark, I’m now well into the 20% territory. Is that too much, or is it not enough?

Precious metals are a little easier, especially Gold. The chance of Gold losing its millennia old store-of-value status is practically zero. For this reason I will probably increase my holdings in precious metals and decrease those in fiat. Simultaneously I will look to increase my crypto holdings by a similar amount. Yes, crypto remains risky, but is it really riskier than fiat?

In a world of inflationary assets, only those with finite supply can be considered consistent long-term stores of value. I’m not a trader, so I’m not after short-term gains or volatile markets, I’m after long-term growth. For now it looks as if precious metals and crypto offer me the best chances of that; not only good returns, but also relative safety compared to fiat – as unconventional as that may sound and as contrary as it may be to my education in such matters.

At this stage it’s worth asking the question: “What about property?” I think that’s a valid question, but I don’t believe that it is the answer to my dilemma. In times of plenty (as we have enjoyed for the last decade), property is one of the things which balloons in value. I watched the price of my own home race upwards pre-2008, then I watched the market pop and the value of my house stagnated for about a decade. Only in the last two or three years has it suddenly climbed again. Remember that the 2008 crash is largely blamed on factors including the unsustainable property price bubble. Already I can see that property prices are suffering in my area. Houses which are for sale just don’t sell, sellers are slashing prices by large two-digit percentages. Rental properties stand open as people rather downgrade their lifestyles than pay such exorbitant prices. The housing market is in trouble – itself an indication that the next crash is already actually underway.

Property IS limited. There will always be demand for it, thanks to a growing human population. BUT it is overvalued, and a price crash will probably be rather severe. It takes a long time for property prices to recover from a crash – people don’t emerge from a depression with a wad of cash to splurge on an expensive house. I would rather not be in property during such an event. For the nimble trader with cash at hand, a few great property deals should become available at the worst point of the crash – but that’s beyond the scope of this post.

So what now?

Truth be told, I was on the verge of shifting money out of fiat two weeks ago. Unfortunately for me, I was a few days too late. I watched helplessly as Bitcoin roared back into quintiple digits territory, Gold shot to new 6-year highs and my local currency dropped like a stone – all simultaneously of course.

This leaves me in the old catch-22 situation: buy high or wait for a dip that may never come?

To make things even worse, Bitcoin is riding a very non-committal path along the top of my diagonal Fib retracement levels. It’s giving no clear indication of whether it will drop again (as I hope it will), or it it will shoot off to a new 2019 high.

Made by Bit Brain with TradingView

 

 

Looking carefully at the market, I would say that exceptionally poor altcoin sentiment may well indicate that crypto sentiment as a whole is poor and that BTC should drop lower. Conversely, the global fiat fears could kick BTC higher and ignite a bull run at any time. I’m leaning slightly towards there being another dip. The little dashed line you see on the chart is an alert which I have set at $9350, my current buy price (subject to change). Whether we will reach that mark or not, I do not know. Perhaps BTC will reach it and drop far lower – in which case I will probably buy like a maniac. For now I consider my previous BTC post to still be valid – so I still think that I can get my BTC dip.

Once I do buy, whether low or high, I will probably convert a fair amount of my BTC into altcoins (diversified altcoins). I’m a firm believer in buying when there is blood in the streets. As a value investor, altcoins look like a great buying opportunity to me now, possibly the greatest buying opportunity I’ve ever seen. To hedge this bet I will probably leave about 50% of what I buy in BTC. BTC may not grow like the alts when things are going well, but it is the most secure and durable of the cryptocurrencies, and it will weather any further price drops better than what the altcoins will. With BTC dominance at over 68%, I can’t see altcoins getting left behind for much longer- hence I am keen to get money into them NOW! This CoinGecko “Top 100 coins” chart illustrates the extent of BTC dominance:

From https://www.coingecko.com/en/global_charts

 

 

Where I come from we call that “unsustainable”. Sorry BTC maximalists – your coin is great – but so are many altcoins.

Similarly, when it comes to buying metals, I may look at alternatives to Gold. Like with BTC, I will put more into Gold than the other metals, but I almost certainly buy more of the higher ROI potential Silver and/or Platinum. Much of that also depends on how close to spot price I can get on each asset, and also on some local laws and regulations which affect precious metals trading, especially the taxation thereon.

Conclusion

As you can see, this most was mainly just me thinking out loud. I apologise if there is no specific actionable information and if it is more opinion than fact or hard analysis. Also, much of it is specific to my situation. However, I believe that parts of this post will pertain to most if not all of you, and that you should be asking yourselves similar questions and have similar concerns. I have no doubt that we shall still see large financial changes, call them “upsets” within our lifetimes. We will probably see a few such events. I believe that the scarce resources such as Bitcoin, Gold and property are good assets to hold for the long-term, depending greatly on local conditions and on when you buy them. It is now my immediate goal to increase my scarce asset holdings and decrease my fiat holdings as soon as I can. If a dip does not come soon, then I will be forced to start DCAing into such assets at higher prices.

The world has changed and fiat is no longer the safe asset it once was. The rate of this change is surprising even to me – a staunch anti-fiat campaigner. I am acting accordingly. I suggest you seek qualified advice in doing something along similar lines.

Yours in anything that isn’t fiat-based
Bit Brain

“The secret to success: find out where people are going and get there first” 

~ Mark Twain

“Crypto does not require institutional investment to succeed; institutions require crypto investments to remain successful” 

~ Bit Brain

Bit Brain recommends:

Crypto Exchanges:





An Exciting Week!

 

As an exciting week draws to a close, let’s take a look at some of the important happenings of this week:

Bitcoin

At the start of the week I wrote about BTC and what it may do next. At the time, I wrote that we were either looking at the formation of a bull pennant, or were gearing up for a breakdown followed by a price surge, something like this one of 2017:

 

The latter scenario looks to be the correct one, with BTC dipping, followed by the predicted rapid price recovery. I misjudged the depth of the dip though, I based my support level on the wrong data, with the result that I was off by $300. In retrospect I’m kicking myself, because I spotted the real support level during my initial analysis, but ignored it as I thought it was too small to act as effective support. The chart 2017 chart above is taken from my last BTC post. Looking at it, you can see the little zig-zag of support which formed in May at about $1800, that support level later became the bottom of the dip.

Looking at the 2019 chart below, one can clearly see where I made my mistake:

 

For me this is a lesson learnt: Don’t ignore the small support/resistance levels during weak market movements. I’ll remember that in future, hopefully that lesson can help you too.

Precious metals

Precious metals have had a whale of a time this week. Gold broke out of its 5-year-old converging triangle a month ago, signalling that greater moves were on the cards. This week we saw some of those moves. Yesterday Gold pushed up to new 2019 highs. In fact, Gold is now trading at prices last seen in May of 2013. That’s exciting for Gold investors and could mean the return of logarithmic growth for Gold. This has been a long time coming: we all knew that Gold price suppression couldn’t last forever. We all knew that clever money would eventually start seeping out of the fiat market and looking for stores of value prior to the next fiat crash (whenever that may finally come). From this point onward, I believe it will be very difficult to stop the rise of Gold and its metallic siblings. The same reasoning applies to Bitcoin.

 

But the real winner of the metals this week must be Silver. It opened the week at a price of $15.19 and at the time of writing is now trading at $16.35. With a rise of 7.6% for the week, Silver is looking almost as good as crypto!

One of the main reasons that investors remain so eager on Silver right now, is that the Gold/Silver ratio is still heavily tilted towards Gold – far more than what it should be based on the fundamentals of the two metals. Savvy investors have been steadily building up their Silver holdings in anticipation of a long-overdue correction. This week the Gold/Silver ratio dropped from 93:1 to 88:1, despite the rising price of Gold. The highest Gold/Silver ratio ever reached was a brief spike to 100:1 in 1991, after which it dropped steadily down to 40:1 over the following seven years. A “normal” Gold/Silver ratio is about 50:1. With the ratio still having a long way to fall to reach normal levels, Silver continues to look extraordinarily bullish.

 

Not to be left behind, Platinum also enjoyed sizeable gains over the course of the week. It is on the verge of confirming its breakout from its own converging triangle. Like Silver, the Gold/Platinum ratio is also weighted far too heavily in favour of Gold at the moment. Platinum is usually a little more expensive than Gold, but at the moment Gold is trading at almost 1.7x the price of Platinum! For Platinum to reach “normal” levels again, this means that it would have to roughly double in price. Factor in the fact that Gold is rising in price now, and Platinum becomes another extraordinarily good investment!

Libra

I’m so sick of hearing about Zuck’s fake crypto – sooo sick of it. In THIS POST I already showed you why all the Libra hype is just that: hype – and nothing more.
BUT, I’m glad that I’m hearing about it so much. I’m glad for the following reason:

Had Facebook been ready to launch Libra after their big announcement, then it would have been a different story. Even though it’s a stablecoin, I have no doubt that people would have flocked to Libra if it had been launched around the time that its whitepaper was published. People are very greedy creatures; when they hear big money names like “Facebook” in the same sentence as “currency”, then they race to grab whatever they can – like disgusting vultures flocking to a carcass. Only now there is nothing for them to flock to…

In the meantime, Facebook/Libra is getting its name dragged through the mud as regulators go after it from all angles. As I have said on many occasions: Private Blockchains are doomed to fail as cryptocurrencies – centralised blockchains go against all the principles that Satoshi built into blockchains by design – THEY CAN NOT WORK!

As things look bleaker and bleaker for Libra, the less informed public is starting to realise the faults of centralised crypto – and better still – they are realising the benefits of decentralised crypto. Every time the word “Libra” is spoken, it’s in an increasingly negative context. We may even get to the point that it becomes impossible for Zuck to launch his mega-shitcoin at all.

So let people keep speaking about Libra, let them get tired of hearing about it. The novelty value has already worn off, and I think that the more we hear about it now, the less of a big deal it will be if it ever does manage to launch.

NEO

and Ontology

Meanwhile in China: NEO and Ontology are cooperating with one another at a whole new level. Yesterday they announced their intention to jointly “build an open cross-chain platform and establish the foundation for next-gen Internet.” The focus seems to be in integration and on cross-chain interoperability. While the two chains were already closely linked, I believe that this will make them even stronger, a case of “the whole being greater then the sum of its parts”.

Read more abut their new joint venture here: “NEO and Ontology to Leverage Respective Strengths to Build an Open Cross-chain Platform”

More Bitcoin

While we’re talking about China –  I almost forgot: it seems that president Xi Jinping is slowly letting cryptocurrency legitimacy creep into his country, just as I have said he would in many of my posts. Xi is progressive and seeks to build his massive nation, something he probably knows he can’t do without embracing crypto technology. He’s taking small steps so as not to annoy the old guard, but the important thing is that he IS taking them!

This article “China Ruling Bitcoin is Property Again Is ‘Major Milestone,’ Says Investor” describes how the Hangzhou Internet Court declared Bitcoin to be “virtual property” yesterday. This is now the second such ruling in China – a move which I think will remove a lot of fear from the minds of potential Chinese Bitcoin investors. If the courts are willing to protect their Bitcoin as “property”, then they need not fear losing it.

I keep telling you: once the Chinese market really opens its wallets to crypto, it will be like nothing you’ve ever seen before.

I strongly suggest that you get your good Chinese altcoins at cheap prices while you still can! Coins like VeChain, Waltonchain, THEKEY and of course NEO (and ONT) can be had for next to nothing! Most of us missed the chance to buy $0.10 Microsoft, Google or Apple shares – well here are their modern day equivalents! Have you learnt your lesson yet?

Conclusion

All the main topics in this post today are things that I’ve invested in (except for Libra of course!) The purpose is not to get you to buy what I have and inflate the prices (I WISH I could control the prices of Gold or Bitcoin!), it’s to show you why I invest like I do, and to help you not to miss the opportunities that I think are potentially very rewarding. As always – DYOR – but that includes listening carefully to what Bit Brain has to say.

Have a great weekend everybody!

 

Yours in crypto (and other things)
Bit Brain

All charts made by Bit Brain with TradingView

“The secret to success: find out where people are going and get there first” 

~ Mark Twain

“Crypto does not require institutional investment to succeed; institutions require crypto investments to remain successful” 

~ Bit Brain

Bit Brain recommends:

Crypto Exchanges:





Stores of Value – End of week roundup

A quick post to end off the week – let’s take a look at what the major Stores of Value are up to.

Gold and Bitcoin are my two favourite Stores of Value. Many people seem to believe that you should hold either one or the other – I believe that diversification is safer and better. It’s always nice to gain value, but a Store of Value should HOLD value as a primary characteristic, and gain value as a secondary one.

I know that property is also seen as a good store of value, but property rights are not universal, in some places property can be a risky investment. Ask Zimbabwean farmers how secure property is as a Store of Value.

Bitcoin

After a quick rise at the end of last month, Bitcoin has spent the week counter-correcting, over-compensating and generally just consolidating. There are evidently many new investors in the market and their weak hands are predictably scared by “sudden” rises. It is amusing to watch how shocked mainstream reporters seem by the “extreme volatility” of Bitcoin – or as more experienced crypto investors would call it: “the norm”.

At around $11400 at the time of writing, I consider Bitcoin to still be suffering the effects of a little FUD after it’s recent rise and subsequent fall. I believe it is trading at a lower price than it should be, and I expect it to recover about $1100 – $1200 over the next few days as it makes its way back to the median mid-term trendline. That trendline runs along the 0.382 diagonal Fib and is indicated by the dashed line on the chart below:

Made by Bit Brain with TradingView

Gold

After an up and down week, Gold looks to be ending on a bit of a low note and may well close below $1400. This is no cause for alarm. Gold has managed to hold the majority of its mid-June gains and is looking rather bullish. Looking at the chart we can see that it appears to be forming a bull flag after its climb. A bull flag is a continuation pattern and indicates that gold is likely to continue its climb. The dashed orange lines are the bull flag and the solid yellow lines are the limits of the converging triangle that Gold has now conclusively broken out from.

Made by Bit Brain with TradingView

The very thin dashed line is an interesting one and something which I only added to my chart yesterday: it’s a line running parallel to Gold’s previous climb. If Gold can once again climb like it did from 2000 to 2013, then that little dashed line is the path that it will follow: standby for possible $2000/oz Gold in November 2021. See the zoomed out chart below:

Made by Bit Brain with TradingView

For those who may be curious: that means $5000/oz Gold in June 2027…

Conclusion

After a week of ups and downs, I’m looking forward to seeing Bitcoin climb again soon. The media is speaking about Bitcoin much more than ever before. The mass media gets almosteverything wrong, but the exposure is still good. For the foreseeable future the altcoins will probably continue to suffer. Eventually the new money will find the likes of Ethereum, Litecoin etc, and then finally trickle down into increasingly smaller projects. For now it’s probably best not to turn your BTC into altcoins (which are NOT as good at storing value!).

Should BTC fail to climb for some reason, then it shouldn’t drop lower than the long-term trendline, now sitting at just over $10000 (which is also a psychological support level). That trendline is depicted by the thin dotted line on the BTC chart.

Ignore the media reports that try to state reasons for the recent increase in the prices of BTC and Gold. Once again, they miss the big picture and focus on stupid short-term issues like the Trade War or Zuckerberg’s pseudo-crypto. The big picture – as you know – is that fiat economies and the politically correct, liberal, yet despotic governments that support them are slowly losing public support as people wise up to their trickery and failures. If there’s one thing I would NOT store value in now then it is fiat based assets!

Yours in crypto

Bit Brain

“The secret to success: find out where people are going and get there first” 

~ Mark Twain

“Crypto does not require institutional investment to succeed; institutions require crypto investments to remain successful” 

~ Bit Brain

Bit Brain recommends:

Crypto Exchanges:





Bitcoin and general tips

 
This won’t be a long-post, I have some “Crypto Housekeeping” to do.
It occurred to me that my housekeeping itself may be of value to my readers, so I’m quickly going to run through it with you. But first let’s look at the big names:
Metals and BTC:
Yesterday I spoke about a precious metals breakout. My criterion for the confirmation of a Gold breakout WAS met! Now I wish I had had more money to put into Gold earlier this year! The other precious metals I discussed also performed well yesterday – it looks like they may finally regain their rightful prices.
 

Made

Precious Metal Run

Gold has FINALLY broken out of its converging triangle by a significant margin. The breakout isn’t confirmed yet, but if Gold can close above $1360 today, then I think it will be a very strong indication that the breakout is real.

The converging triangle has been a prison for Gold for the last 5 years.

The general trend for Gold is a permanently bullish price increase. This is due to constant demand and the natural scarcity of the metal. A logarithmic plot shows how Gold broke away from a 12-year price trend in 2012, and has been lying dormant ever since. I

Crypto Snippets 2019 05 01

It’s been many moons since my last “Crypto Snippets” post, in fact my last one was 10 months ago. Looking through that old post, it’s amusing to see that I started it off by complaining that Ethereum had still not switched to PoS.  If I had only known…

A “Crypto Snippets” post is a multiple mini-discussion post centred on lots of little topics as opposed to one main one. Here we go:

Tether. Again.

I wrote about Tether last Friday, mentioning the problems with it and BitFinex. Since then I have seen much debate and uncertainty on online forums: people defending Tether and rumours that everything

The RED List

The Red List is a list of threatened and endangered species. That’s not the list we’re talking about today. We’re talking about this one:

From https://www.tradingview.com

That’s the little tab which I click on first thing every morning when I open TradingView. The Red List is the list of highlighted stocks, cryptos, commodities etc which I consider most important to me and which I like to keep a close eye on.

Unlike most of my posts, this one does not come from my pre-planned and dynamic list of “topics I must blog about when I get a chance”. This post was conceived last

Silver – breaking local support

This weekend I read through the latest World Silver Survey, published by The Silver Institute.  For those unfamiliar with these reports, they are published on an annual basis and are very well written. At about 100 pages in length, the document is definitely not a quick read, but you can pick and choose areas of interest, it isn’t necessary to read every table and sub-heading. You can find all the World Silver Surveys (from 1950 to date) at https://www.silverinstitute.org/all-world-silver-surveys/.

For some years it has been noted that Silver is undervalued compared to Gold and is probably the better long-term investment. Indeed it

Platinum: Crossing the Bar?

Sunset and evening star,And one clear call for me!And may there be no moaning of the bar,When I put out to sea, Crossing the Bar ~ Alfred, Lord Tennyson

Tennyson was speaking about death in this famous poem. Today I’m going to take a more positive spin on “Crossing the Bar”; this post is about life – Platinum coming back to life!

Almost a month ago I published a post titled “Time to buy Platinum?”, in which I made it fairly clear that I believed it was indeed time to buy. In fact: so good was my post, that it convinced me to

Time to buy Platinum?

Greetings fellow Trybe members! Allow me to introduce myself: My name is Bit Brain and I normally reside at a place called TIMM – the Traders & Investors Mentor Market. I hope to post more on the Trybe platform in future (though unfortunately it’s not as simple as copy & paste). I am a cryptocurrency blogger,…
Read on Trybe

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