The million dollar question: Have we reached the floor or is a new fall coming? Guessing the low of the Bitcoin price during a long bearish period is the favorite sport of the most greedy, because the lucky one with the clairvoyance necessary to identify that precise moment will be able to get the most out of the recovery. Have we reached that moment? Or is another price collapse coming?
Before taking any conjecture about it, we must take into account that the establishment of a minimum is an exceptional event. that is, cthere are many aidas, but the floor is only one. Which is to say that false minimum calls are quite common. Here is the mistake of many. During a period of pessimism, the illusion of buying at the best possible price becomes the Holy Grail. So, in the manner of Peter and the Wolf, frequent announcements of the minimum become a bad habit during a period of despair. Be careful with that.
“Buy the dip” is the rallying cry of the bulls. However, this strategy is not the best at the wrong time. The practice tends to work very well at the beginning of an uptrend. Because the falls, during a bullish period, are temporary setbacks. Then, “buying the drop” at that point becomes taking advantage of a discount.
Very different is “buy the dip” at the beginning of a bearish period. In fact, there is no worse time to buy than near the all-time high and at the beginning of the meltdown. In this case, “buying the dip” is buying “high.” Because those first dips mark the start of a downtrend. During a bearish period, it is better to buy late rather than early.
Bukele, the president of El Salvador, made this mistake with much fanfare. In fact, he has become the great example of what not to do. First of all, he arrived very late in the bull cycle with the enthusiasm of a newbie. Larrived late and bought “expensive.” He did it, with public money, and up to his neck in debt. Today it is in red. How did you celebrate each purchase? On Twitter, he celebrated his grace at the top of his lungs. But, with each purchase, the price kept going down and down.
Which brings us to the subject of unrealized losses in the case of someone who invests for the long term. People who bought very close to the maximum, in full euphoria, often justify buying at a premium by talking about the long-term investment. This is a propaganda technique implemented, during a bearish period, to play down the falls. What is Bukele going to say? “I made a mistake”? What is Michael Saylor going to say? “Mistakes were made”? I doubt it. It’s so much easier to bite your lip and pretend everything is going according to plan.. And it is true. Time, sooner or later, will heal all wounds. But that’s not an excuse to buy recklessly.
Bitcoin is not a productive asset. Bitcoin is a code in a database. It does not generate cash flow (like real estate) or dividends (like stocks). And Bitcoin cannot be used productively either (like raw materials). This code simply represents a rate. There is no underlying asset that we can independently value. In the case of a productive asset, this distinction is possible. But, in the case of a code, it is not.
When a Warren Buffet tells us that he has bought a farm with a long-term vision and expresses his indifference to its short-term market price, he is really suggesting that he has bought that asset at a good price and hopes to recover the investment in it. time with income from the farm itself. In this case, price and value are not necessarily the same.
Bitcoin is not a farm, of course. In the case of a code with monetary value, its price is its value. Bitcoin’s market valuation is based solely on speculation. In other words, profits or losses depend on the fluctuations of its price. In this context, unrealized losses, whether we like it or not, are also losses. On the one hand, they remind us that we have bought at a premium. And, on the other, recovery takes time. Which means a missed opportunity. After all, there are assets out there that haven’t lost nearly as much value over the same period.
Now, losing money is not the same as losing opportunities. He who does not buy does not win, but he does not risk either. In other words, you don’t have to buy to buy. Shopping is not to be taken lightly. If the price has fallen a lot from its all-time high, that does not necessarily imply that the bottom is close. I mean, it’s not a matter of drawing lines on a graph. And it’s not a matter of building expectations based on past glories either. The floor is not established by a mandate of fate. It is not the past that defines the apartment. It is the future.
The investor buys today to earn tomorrow. So what is relevant is not yesterday’s price. What is relevant is tomorrow’s price. And tomorrow’s price rises with higher demand than today’s.
I know enough to know that the predictions are a trap. In these cases, the reader will surely expect a precise and definitive answer. “Yes, this is the floor.” “No, this is not the floor and a new fall is coming.” But I’m not going to throw myself into that river. Why? Because Predicting a floor is extremely difficult. In retrospect, it is very easy to identify a minimum. But, at the time of the event, it is not a simple undertaking.
Of course, every investor requires some guidance so as not to buy blindly. And to do this, you need to ask better questions. “Fall or floor?” I do not know. But we can answer other questions. For example: When to buy? And why buy? The investor should buy before an optimistic forecast. This means that we see signs that allow us to anticipate an increase in demand.
Will the demand increase between now and the end of the year? Will the demand increase during the first months of next year? Why? If we have information that leads us to believe that buyers are on the way, we can start talking about a recovery. A flat marks a significant shift in expectations due to the early anticipation of a radical change in conditions in the future. Can we see that change now?
Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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