The Bitcoin Bubble
Bitcoin has caught the attention of the world lately. Once an obscure currency on the fringe of society, now in the forefront of every investor’s mind. The question they are asking themselves is should I invest in Bitcoin? Bitcoin nearly hit $20,000 earlier this month. Now it is at $11,000. Obviously this is a significant drop. Check out this graph:
Is it over?
Bitcoin is likely to continue to rise from this point forward. The bubble has probably not popped just yet. If the Bitcoin bubble popped the price would likely be under $1,000. Right now there is still a strong belief that Bitcoin will rebound and be worth something.
I agree that the bubble hasn’t popped and that it is likely to go up from here. At this point you have investors who wanted to get but didn’t. Now they see this price as an opportunity for entry. On the other hand, you have investors that bought in at $19,000 and are down nearly 50% already. The price drop has not caused a mass sell of and panic yet. Markets operate on psychology, and the hysteria phase has not started just yet.
At some point all of the crypto currency investors will sell most of their coins off except for the ones who have intrinsic value beyond block chain technology.
Look back at 1929 when the stock market crashes. You can see a similar pattern in the current Bitcoin line.
If we have a situation in the Bitcoin market like the 1929 stock market, then we will likely see recoveries that don’t hit the high of $20,000. This is what we call the dead cat bounce. In 1929 the stock market was at an all time high driven by margin given to willing buyers. At this point in time the stock market was relatively new, but the stocks were tied to a company, so the stock notes you were buying did have some intrinsic value.
The problem was there were no margin buying rules back then and people were buying on credit. This pushed the market up artificially until finally there were no more buyers are the current prices.
What to do?
I am not an investment advisor, but I would be careful about buying in to Bitcoin. As you can see from the charts above, the Bitcoin chart is starting to look like the stock market’s after 1929. It is trying to recover, but the people who bought at certain levels are selling as soon as they break even. This reaction makes it hard for prices to rise back up again. Now buyers are going to be scared to enter the game after seeing what just happened.
If the price holds steady for a while, we can expect it to increase, if it goes down from here, then we have likely seen the end of Bitcoin.
If you do want to buy Bitcoin check out Binance.com
They have great coins you can trade other than just BTC and ETH.