If you're in the market for cryptocurrency you may have noticed that values are on a downtrend ...
It's easy to start questioning your investments, especially if you bought near Bitcoin's $19,000USD peak in 2017, or if you are mining and see the sharp increases in difficulty vs payout.
It's also easy to look at these numbers and buy into the idea that cryptocurrency has reached the "Bubble" stage of so many technologies, similar to that of the dot com bubble of the early millennium.
While these are the easy things to do, smart investors know to put emotions aside and evaluate the evidence rather than just doing what's easy.
How Should I Decide?
You want to invest in something with growth potential, but you don't know who to trust or what to invest in. This is a good position to start from.
First and foremost; TRUST NO ONE
I know this is really hard with hundreds of self proclaimed "experts" telling you how they got rich, but most of them got there PURELY BY CHANCE. Yes, I said that.
FOR THE PEOPLE IN THE BACK, BITCOIN MILLIONAIRES GAMBLED AND WON. There are very few people who made a fortune in cryptocurrency by doing research and investing wisely.
Second; Know what you're buying
Ask yourself "What do I know about cryptocurrency? What do I know about blockchain? What does the issuer of this asset know? What problem does this asset solve?
These are important questions.
Bitcoin is facing a scalability issue where the cost of maintaining Bitcoin (operating a "mine") outweighs the reward. If no one mines the coin, no transactions get verified, the coin dies. For cryptocurrency in general the death of Bitcoin can be a major issue.
ADA (Cardano), STEEM/SBD, and a few others address the scalability issue by using other methods of mining, such as Proof of Stake or Proof of Mind algorithms. A combination of Proof of Stake and Delegated Witness assets could prove to be the solution that replaces or surpasses Bitcoin.
Where we are left as cryptocurrency evolves brings us to a situation similar to when the dollar (credit against assets) replaced gold (physical assets) in the market. Is Bitcoin the new gold?
Third; Follow (or lead) the Market Makers
Know the influencers, watch the media. You can predict movements in the market when people are talking about the market, look for the patterns and know when to buy/sell. Based on the unpredictability of the market, many smaller investors "buy the dip" instead, buy just above the dip as markets begin rising. Similarly, "selling the peak" means selling just below the peak for the best gains.
IS IT TIME TO HODL?
If I were to use a purely mathematical approach, Bitcoin has a ceiling of USD $5000 based on it's run from inception to present and disregarding outliers. As of this article it is priced at USD $6,473 seemingly suggesting that it is overvalued. Because market makers will use a mathematical approach, the market is likely to fall to this imaginary ceiling and begin to equalize.
Similarly, if I calculate Bitcoin over 3 years and 3 months respectively, the ceiling moves to USD$12,000 with a predicted value today at USD $8,000 which suggests that Bitcoin is dramatically undervalued. Because market makers expect to make a profit, selling between USD $5,000 and USD $8,000 and buying under $5,000 is a smart move in the short term.
As for the Hold On For Dear Life (HODL) principle, if you purchased at a price under USD $2,000 and you are looking to make a profit, it may be a good time to partially liquidate and buy again between USD $2,000 and USD $5,000 rather than expecting another spike.
Overall I expect Bitcoin to equalize near USD $8,000 in the long run
Without significant improvements, Bitcoin will become the gold of cryptocurrency. Assets like STEEM and ADA will prevail because of their scalability and ease of transaction.
Tell me what you think
I'm no expert, just someone who does a lot of reading and has an opinion about this crazy investment I have embarked on. I am not a crypto millionaire and I have had wins and losses even using the best techniques. I would love to hear opinions from other investors as well as the community in general.
As always, I steem for my kids ...