The crypto markets in 2021 have been unlike anything we have seen before. Then again, so is the news we hear daily. Massive institutional investors allocating large amounts of money in the crypto markets, while more and more retail investors choose to buy Bitcoin instead of gold.
We are certainly cruising one of the most interesting periods of our economy, and this is not necessarily good for everyone. Covid19 and the follow-up lockdowns are now imposed upon us for more than a year. At this time, we saw Bitcoin appreciate 10x in value, while the US dollar is expected to be hit with double-digit inflation rates.
This article is meant to give an overview of Bitcoin’s performance, and help you understand whether you should buy more, sell your stack, or simply join the rest of us as a hodler. After reading this post, you should have a better understanding of the direction you should follow.
Buying at current prices
People that have not been following the market closely may feel like they have already missed out on the opportunity to invest in Bitcoin. “How can a virtual currency possibly be worth more than $50.000 dollars? It will certainly drop in value, and this is when I will buy”. While being stuck in this common narrative, others are using their funds to buy and store Bitcoin off exchanges, in a trend that is accelerating.
As the price of Bitcoin increases, the number of coins stored in exchanges is decreasing. Of course, you will rarely hear about this in the news. The latest company that came public with regards to its treasury allocation in Bitcoin was Tesla, and it resulted in a price appreciation of $7000 dollars within a day.
In the meantime, Michael Saylor of Microstrategy recently held a seminar for institutional executives on the benefits of owning and methods of investing in Bitcoin with their cash reserves. The event, which attracted more than 8000 people was followed by massive transfers of Bitcoin across many exchanges, most of which occurred on Coinbase.
Of course, to us, the identity of these “whales” is unknown, and we can only assume that they are part of the people who attended the seminar. The pseudo-anonymity that Bitcoin offers make it an excellent way to maintain one’s privacy, while the trend continues to build up. But the direction is clear – we are headed towards a supply shortage, an event which is almost certainly guaranteed to grow Bitcoin’s price further, as the amount of Bitcoin on the open market will literally vanish.
So, is buying a good idea at these price points? In our opinion, it definitely is, especially for those that have a low-time preference.
Choosing to sell Bitcoin at current price points may be understandable, especially if you have been holding onto your coins for a longer period of time. There have recently been some issues with regard to Tether, and it still seems unclear whether or not the issue will remain resolved after the settlement that was agreed upon.
Hence, in order to protect yourself from unexpected surprises, you might choose to convert your funds and stay on the sidelines for a while. This year alone we have seen two steep declines in Bitcoin value that decreased its price by nearly 25% both times. It could therefore also be a great opportunity to exit and reenter the market at a lower point – a.k.a. buying the dip – thus increasing your profits. However, it is a risk you will have to take on your own, as the market may choose to follow the opposite direction.
Holding onto your coins
It is our subjective opinion that holding onto your coins is the best option at this point. We are currently in the midst of a massive transfer of wealth from denominated fiat currencies to “harder” forms of money like precious metals, Bitcoin, and collectibles. We expect this trend to continue for as long as the aftereffects of the covid-related lockdowns are upon us. And judging from the current situation of the economy and the newly proposed bailout packages, this may be for quite a while longer.
Another strategy you can follow is to hold onto your existing funds and continue buying increments of Bitcoin using the DCA (dollar cost average). In short, this option entails that you convert a small amount of your paycheck in Bitcoin across repeating timeframes, in order to increase your amount of Satoshis as the value of the US dollar continues to decrease. Many believe that the price of Bitcoin is poised to go much higher this cycle, this offering you more opportunities to grow your wealth in a time where economic uncertainty is the new norm.