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Bitcoin continues to show strength and it appears the train has left the station with many wondering why they didn’t buy at lower levels.  Where are all the trolls that critiqued us for buying at 13k and were calling us idiots for buying at 6k as Bitcoin was hell bound for zero?  Well they are standing on the platform watching the train leave the station.

When you focus on the long term, buy quality equities, and ignore the shorter term noise and naysayers your wealth will grow.   Stop looking to make a quick dollar, those looking to get rich quick more often than not fail to do so, worse yet, they miss out on the big runs.

The focus should always be on the long haul, so though it appears the train has left the station it is not too late to change habits, and start investing with a focus on 3-5 years or more.

 

Gold and Bitcoin Similar Assets

Bitcoin and Gold are considered similar assets in the essence they are not really used for daily purchases, they are more used as a store of wealth.

Markets tend to cycle between lots of bullish sentiment to tons of bearish sentiment.  The best time to accumulate is when markets are at sentiment lows.

With Gold an investor had nearly six years to accumulate Gold under 1300.  Nobody was interested, sentiment was low, few were long term enough to buy weekly or monthly.

When did everyone get interested?  When gold is trading at highs, when sentiment is high, when the powers that be, once calling for $700 Gold, are now calling for $2500.  Proof?  Premiums on a 1oz Gold eagle went from $15 a little more than a year ago, to about $200 now.

However markets can remain elevated for extended periods of time so where is the top?  Get into that in a few, but first some proportional levels between Gold and bitcoin.

Bitcoin Gold Compare

Proportional Levels

When Gold finally broke the 1980 bull market high in 2008, it rallied about 125% from there.  Who would have thought we would have seen 1800 Gold by 2012?

Bitcoin has followed a similar market cycle, has a similar sentiment pattern, with the talk of QE, money printing, inflation and all the doom and gloom of the Fiat systems.  Yes Bitcoin is not the first, Gold and Silver Bugs have been talking about the same cataclysmic events far before Bitcoin was even a thing.  So we have the same type of sentimental reasons to own Bitcoin they probably follow similar market cycles.

Extending 125% or so from the prior high at 19k it is reasonable to see the low to mid 40’s trade from here, maybe even higher.  From the 2012 peak in Gold it pulled back nearly 50% but never retested the prior 1980 highs.  IF Bitcoin were to follow the same cycle it is reasonable to see a pullback into the low 20’s which would still be slightly higher than the previous high.

But this is a broader view, many want to know what about the now.   Before we get into that, I want to have cash to put to work when a broader pullback happens.  This is the plan, your financial position will determine your potential strategy.


BTCUSD (Monthly)

Strong equities go through periods of over enthusiasm to low sentiment as markets cycle.  During periods of high sentiment, lots of enthusiasm, price targets are elevated and the equity over shoots the broader trend.

We saw this in 2017 after Bitcoin diverged from the mean and when on a 2400% rally over 9 months, before going into a multi year bearish pullback where it reverted to the broader trend.

Currently we have bullish divergence from the broader trend and though it is feasible to hit 250k in a single swing, we saw this back in 2017, I would not bet my house on it.

What is more likely to happen is we get a multi month rally into the 50’s potentially 100k area before reverting back to the mean trend.  This does not imply we get better prices after such a broad rally, a reversion to the mean could be at 35k or higher.  We simply do not know.

But the long term trend is up, and it is reasonable to see above 100k over the next 3-5 years.  Now nothing is guaranteed, and disruption in industries happen, so there is no guarantee Bitcoin pushes the 100-250 1 million dollar levels in the future, but as we know it is not out of the realm of possibility.

Some reasonable levels to look for and also how to invest for the broader picture.

Bitcoin Daily

BTC Daily

Another bearish pinbar is attempting to form here, but we can not ignore the strong bullish momentum preceding the formation.  This is likely the 5th wave of a broader 3rd wave EW cycle.  For those that are new, markets do not care about Elliott Wave or Fibonacci levels, but they do provide us some expectations based on projections and market cycles.

The 32400 level is the 1.68 extension of the wave 1 to 4 and is a typical level where to expect some hesitation or a pullback.  We are getting some hesitation as evident by the pinbar, but we need to see 30k taken out to confirm.

We have some capital to deploy and we are looking in the mid to low 20k area for a buying opportunity.  Though it is a lower probability, it is possible to retest the wave 4 of the current fractal cycle back around 16-20k.  However it is just as reasonable for a correction to pullback into the 25-27k and we get the next level higher.

So with so many possibilities how does one get into Bitcoin that owns none?  The key is setting up a plan and strategy to implement.  Lets go back out to the weekly.


Bitcoin Weekly

On the weekly we have hit the 2.618 swing of leg 1 & 2 of the broader cycle.  Pretty much overlaps with the shorter term fractal cycle and when multiple time frames overlap the level or area has more weighting.

As mentioned to our paid members, if we push the upper end of the target zone, a pullback is most likely to be back towards 24k which is where the current 38% retrace overlaps with the prior 1.618 extension.

My thoughts are there will be buyers in the waiting in the lower 20k area so any pullback into such a strong market is an opportunity to buy for the next leg higher.

The next target area if this is the end of wave 3 is around 45-60k over the next 12 months.  This is a target area, does not imply it will make it, or will not overshoot it.  Either could happen here, we saw this with gold recently where it made a new ATH and has consolidated ever since.

Since I own Bitcoin from a very low average cost I do not mind trading around this position for higher targets, further reducing the risk I have in the space in general.  So essentially from a long term investor already in a decent position, I am waiting for a pullback whether here or from higher levels to add a position trade.

However many that are new to the space are asking “would you buy here or wait?”  Well this really depends on your financial means, time frame, and your belief in future targets.

I know many in the space have targets of 100k-250k and even $1,000,000.  Are these levels and time frames reasonable?  Back to the monthly.


BTC Monthly

Still plenty of room to run in the broader time frame.  Though we have a modest 45-60k target zone for the end of 2021, it is also reasonable 100k trades as well.  We don’t know, nobody does whether the top is here, 45k 100k or 250k for this cycle.

Market cap of Bitcoin is currently about 607 Billion Dollars.  In today’s world $1Trillion dollar companies exist, the Microsofts, Apple’s and Amazon’s of the world, yet Bitcoin is more of a store of wealth similar to Gold so not really a good comparison.

Today the market cap of Gold is closing in on 10 Trillion Dollars.   The total market cap of US Treasuries of Debt is about 30 Trillion. Bitcoin is about 5% the market cap of Gold and only about 1.5% of Treasuries.

So not unreasonable to see Bitcoin hit a $1Trillion dollar valuation or even a $2 Trillion dollar valuation putting the price about 100k in the broader term.  A $1 Trillion market cap is about 48k Bitcoin, a $2 Trillion market cap is about 96k.

So how do you invest if you are new to Bitcoin.  Well if you’re finances are limited and say you want to spend your $1200 stimulus check for example, buy $100-$200 here and look to buy any pullback.  This means you may not get better prices, but most likely you will.  Set a bar and add in $100-$200 increments on pullbacks.

However if you are capable of putting so much money to work a month, simply Dollar Cost Average automatically.  Take $200 an invest on the 15th of every month and forget about it.  You will be buying some highs, but you will also be buying some lows.

Nothing wrong with doing a little of both, and adding every month and during broad pullbacks adding a little more positions in addition to your monthly adds.

The key is to put a level in place where you stop adding and also a target level of where you want to remove risk.  I would say 45k would be a reasonable area to stop adding and 60k and above an area to start removing risk IF I had no exposure and I was focused on the long term.

However we are in it so we are already in the removing our risk but do not mind trading around a position.  So we have capital that we will put to work on a pullback whether here or higher.  Doesn’t matter our goal is to remove risk into highs and add into lows with the ultimate goal of having a nice position in Bitcoin and a couple alts at NO RISK!

Build up some cash into highs, buy back into broader bear markets.  OF course it may be a year before we get that bear market but eventually it will happen and we want to be prepared, not reacting.

The key here being small adds small sells.  Where many go wrong is they go all in all out with an investment portfolio.  Like Gold we said hits 1600 we will trim 5-10%, hits 1800 trim another 5-10% hits 2200 another 5-10%.

IF gold goes to 5k we are still in it, but if we get a broader sell we have cash to rebuy sells at a lower price.  Maybe we don’t get back to 1600, so be it, the key is to remove risk not keep adding to it.  We use this same strategy with Bitcoin period.

Summary

Most investors jump in without a plan, so they are shooting in the dark.  They have money to invest they go all in with no plan, no strategy, no targets no time frame and hope for the best.

The other key is keeping your risk in line with your pain tolerance.  IF Bitcoin pulls back to 10k can you sit through the pain?  IF not your position is toooooo big.  Keep it in line with your pain tolerance, do not go into an investment with how much you can win, but focus on how much you can afford to lose.

The final comment is to stop treating an investment like a trade.  Many are kicking themselves in the ass for selling out at 20k or lower and many had broader targets of 100k.

They had no strategy, they had no plan, just hoping they timed the market right.  Small adds, small trims makes for a simple and very good long term investment strategy.  With something like Bitcoin I would take no issue with simply continued adding up to a pre-determined level.

Pretty much laid out our long term thoughts, and how we intend on investing and position trading for the future.  We sat through a lot of crap for two plus years, but we never waned.

Our crypto account is up over 175% after starting it at a 20% deficit  back in June of 2018.  Using DCA, trimming out losing alts, focusing on the winners, and most importantly sticking to our plan and strategy we were able to take a loser and make it a winner.  But most did not have the patience, most could not handle the pain, most could not stick to a plan, and for them it is hopefully a lesson in investing.

Very difficult to beat long term strategies with shorter term ones. Hard to believe we were trading at 12k in late October and 20k in mid December.  One thing about long term strategies and being early, you are on the train when it leaves the station.

 

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