Be vigilant and cautious, while enjoying the current adoption of BTC

There is lots of euphoria and jubilation that BTC has broken through to a new ATH. I think there are certain elements of this current BTC bullrun/market that are unique and should be called out:

1. Larger public institutional investors are buying into BTC near ATH prices. This is important because more institutions aren't into "gambling" and will very much not want to take a loss. This legitimizes BTC in some ways, but also offers a certain threat that if the price action turns the opposite way, they'll hand their bags off to the first rube willing to hold them.

2. Almost no fanfare. In 2017, when BTC rallied to $20k, there was lots of fanfare across multiple news and investment outlets. This time, the BTC rally has almost been covered as an inevitability.

There are lots of new people on this sub that could easily get wrapped up in the positivity. I've been a BTC holder since 2016, but only seriously got into it recently and made it a larger part of my net worth portfolio. I think the most important thing to keep in mind about BTC are the followings:

1. Temper positivity with reality. BTC can be life changing, but it still has many head winds from major government monetary institutions. Its value is extrinsic, in that it has value because there is inherent worth in a fixed float, proof of transaction, historical record based currency. But since none of those things can be "owned" by large governments, there will be headwinds by those in power to suppress the adoption of such a form of currency. This will lead to volatility.

2. BTC is still in early adoption, and though large institutions are buying in, the largest players still haven't even dipped their toes. Once JPM, GS, Berkshire Hathaway all starting buying in with their huge portfolios, we'll see much more volatility and upward pressure. This doesn't even account for certain countries pegging their currency to BTC instead of USD. Or even for citizens of countries with less stable governments that all abandon their in-country currency for BTC as a hedge against corruption. Once this happens at a global scale, expect BTC to have much higher upward pressure, but also much more volatility as price manipulation becomes more rampant.

3. HODLing is still the best strategy for the uninitiated. If you're a BTC true believer, then don't try to time the tops and bottoms. When crashed right before Thanksgiving, there were lots of posts here worrying that we were having another crash of 2017. That BTC had flown too close to the sun again. But BTC found a strong floor at 17000 and rallied back to a new ATH within two weeks. BTC is a long term strategy, and a multi-generational strategy. Don't think about BTC as a 6-month get rich quick scheme. Think about BTC over the course of 50 years, and what world governments and currency looks like in that future.

I think the most important thing I can stress here for any new comer is: expect volatility.

Anything that goes up 30% (from 18k --> 23k) in 1 week can come back down 30% in one week. Don't get stuck in the mentality that BTC will go up forever. In the long term, absolutely, but in the short term expect any buys you make to have volatility and immediately shake out.

So create a mental strategy for yourself:

1. If you lump sum in at current prices, are you willing to accept that you could lose up to 80% of BTC value in the short term. Can you live with knowing if you were more patient you could have bought more BTC if you had just "waited" for the pull back? Will the pull back ever come?

2. If you DCA in, and the price rockets up, are you mentally prepared to accept that you should have just lump summed in? Can you live with knowing that you should have had conviction on BTC? If you FOMO in and it pulls back, will you kick yourself for not sticking to your DCA strategy?

I'm a BTC believer, but I'm also a realist that understands the power and risks that come with a completely unregulated currency. And the biggest risk is price fluctuations in short term as major institutional money now is using BTC as a serious asset class.

submitted by /u/radarbot
[link] [comments]