Recently I was talking with a friend about the world economy and what may happen to the currencies of the world. He asked me whether it is still OK to buy Bitcoin and crypto currencies.
The prices of cryptos are very volatile and many cryptos have failed and no longer exist. The smaller the crypto the more volatile the price can be. Cryptos have been known to lose 90% of its value within a single day.
The 2 biggest cryptos Bitcoin (BTC) and Ethereum (ETH) are less volatile than the other cryptos (Altcoins). However over a period of weeks BTC and ETH can lose 80% to 90% of their value. Better than losing that amount in a single day but nevertheless very painful loss to suffer.
While exposed to severe losses, Cryptos offer huge gains. Some Altcoins can double or triple within a day and BTC or ETH may gain, say 30% within a day.
If you are new to cryptos and still dare to go in after knowing how volatile they can be, it is probably best that you start with the relatively less volatile BTC and perhaps ETH (which is more volatile than BTC)
. The All Time High (ATH) of BTC was in November 2021. The actual ATH of BTC depends on which exchange you look at and can be below $65K to almost $69K.
As the price fell from ATH, $40K offered a support level for months. But when it lost that level $20K was another very strong support level. When BTC lost that level, its naysayers said that it could go down to $10K which it did not.
BTC started 2023 at $16,625. The support level of $20K became a resistance level that BTC struggled to break. The price will pull back whenever it is at $20K.
After breaking that level it hovered around $26K. After breaking the round figure of $30K, BTC bounced between $35K to $38K.
The last 3 weeks of November 2023 and the first week of December saw BTC break out of that band spectacularly. In that 4 week period it shot from $37K to $45K. It then pulled back to $43K.
Why the surge on BTC and what is the likely direction of its price? Positive factors include:
1) Market expectations of Fed funds rate has shifted from higher for longer to expectation of a rate cut by the first quarter of 2024.
2) Concerns about the ballooning USA national debt which has now exceeded $34 trillion. The debt will continue to grow given the huge increase in interest cost after the Fed increased interest rate by 5.25% from the initial band of between 0% - 0.25% The spending to support Ukraine and Israel in their wars and providing them with weapons and ammunition will also push spending and the deficit & borrowing. 3 ) Geopolitical uncertainties
4) Halvening that will happen for BTC in early 2024. About once every 4 years the difficulty of mining BTC doubles (the amount of BTC given to miners is halved). This decreases the supply of new BTC and so halvening usually cause the price to go up. The price of BTC does not go up or down in a straight line but zig zags between ups and downs. From its ATH in November 2021, the trend was down in 2022 but has reversed in 2023. Starting 2023 at $16, 625 the ups have exceeded the downs and the current leg took the price to $45K. The resistance of $38K will now become a support level. Even if the price retreats to that level, it is likely to bounce and start another leg up. Given the positive factors mentioned above, it is widely expected that the ATH of $69K will be taken out in 2024. There are people who say that BTC will exceeded $100K and also those who say that $250K is possible.
What some people say may be hopium (mixture of hope & opium) being overly optimistic. But given what BTC has done in the past, it is also not impossible.
My expectation is that the ATH will be taken out.
Starting from $52,000 I will sell tiny amounts (0.0005BTC) and will progressively sell such amounts as the price rise more.
Whenever a sale order as mentioned above is filled, I will use the sales proceeds to place a buy order at around 5% below the price it was sold.
Sometimes the buy orders as mentioned above can sit unfilled for months. They get filled only when a major price correction occurs (price retreat by more than 20℅).
Instead of being upset by such major corrections, I am happy as many of my outstanding buy orders get filled.
The fear of the price volatility keeps some people away from cryptos. For me, volatility is my friend or the "fertilizer" that helps me to grow the amount of cryptos I have as explained above. No new capital is required. Just use sales proceeds to place buy orders and wait for price to fall.
In this way when the price retreats, I will end up with a little more BTC than the amount sold.
What do you think the price can reach in 2024?