Are you capitulating your Bitcoin?
Several people have reached out asking me what do I think of the recent 40% drop in Bitcoin prices.
In the last week, Bitcoin has experienced a lot of FUD (fear, uncertainty, and doubt) which led to a lot of emotional decisions by investors.
They were mainly fueled by Elon and Tesla's announcement to stop accepting Bitcoin as a payment method due to its alleged energy usage concerns. Then came the concerns around Bitcoin mining being too centralized and then Iran announcing a new ban on cryptocurrencies mined abroad. And then finally a major announcement by China on banning all institutions from conducting any crypto-related services.
These announcements have never stopped crypto adoption. In fact, it only fuels them even further. As Pomp says the central banks around the world have been the best marketers for Bitcoin and crypto in general.
Amidst all this FUD and price drawdowns it's important to revisit your investment thesis and review the Bitcoin fundamentals which I did earlier today.
Bitcoin's hash rate is still on par. It is still the strongest computing network in the world.
Blocks continue to be mined and miners are being rewarded.
Unique wallet addresses are still fairly high.
These fundamentals continue to paint an optimistic case for Bitcoin.
The market is currently in a capitulation phase as investors' convictions are being tested and so many are selling. Leveraged investors are getting margin called and getting liquidated as they couldn't put up the collateral in time as the prices kept falling steeply.
What happened yesterday was reminiscent of what happened in March 2020 when bitcoin dropped almost 50% in a couple of days because of Coronavirus fears which led to a liquidity crisis across all asset classes. Needless, to say that was a great buying opportunity as Bitcoin is up 8x since then.
At the end of the day, any investment in any asset class is all about your conviction which should not be influenced by the day-to-day market price of the asset.
Do not conflate the price and value of an asset.
I'll leave you with one of my favorite quotes by Ben Graham:
"In the short run, a market is a voting machine but in the long run, it is a weighing machine."
P. S. I bought more Bitcoin yesterday. So thank you Elon, Tesla, and Central banks for putting Bitcoin on sale.
Disrupting Debt | Ex-Goldman Sachs | 15+ Years in Public & Private Markets
3 年Very well written article ??. How did you determine this was on “sale†? what’s the fair price of this thing in the medium term? Can Musk not launch his own better version crypto- seems his tweets have more power on price than anything else
Project Training Specialist | Project Management
3 å¹´I am a big believer of bitcoin, and not planning to sell anytime soon. I do think it will drop to around 32-35$K, then it will go back again to 55-58$K and become a bit more stable