Contents of this posts must not be interpreted as financial advice. These are just my opinions and are written for entertainment and discussion purposes only.
Bitcoin - the truth machine! There is no doubt in my mind that Bitcoin as a technology influenced many to ponder upon past and old ways of doing things, especially with regards to finance and property, and rethink what is possible in the future. The primary intent of the bitcoin has always been to provide an alternative system, a better network for people to store and exchange value. As a technology it is a fascinating innovation, as a decentralized network it is secure store of value and place to exchange value. While it has so many unique features, its price has always been that attracted the most attention.
Going from zero to a trillion dollar market cap within a decade is just impressive. To my knowledge no company was able to do that, and bitcoin is not even a company. When you are invested in bitcoin, it common to stay updated on the price movements. What impressed me most regarding its price is, bitcoin's ability to reclaim its previous all time high prices. Despite suffering huge drops in price at various times, for some reason it always goes back up. Despite prolonged declines like we have seen in 2018 and 2019, it always wants to make another all time high.
Of course nobody can forecast what will happen in the future accurately all the time. Throwing various numbers as a price target for bitcoin or even other assets is always a guess work. There are always price targets for upside and downside. There are always traders in opposite sides of the trade. Some are right at some time, but nobody is right all the time. Market doesn't listen to one person or group of people, market just does what it does. Half of the time market may not even make sense. Being humans, we always try to find reasons for any price action and justify our convictions one way or the other.
Predicting the future prices, however calculated or educated they may be, are still guesswork. I completely understand this. Yet, I have come to realize and convince myself to a high level of certainty that bitcoin price will always go back to its previous all time high price, given enough time. I guess we can make a similar statement for many assets, stocks, and property as long as we end the statement with "given enough time". However, when I say that about bitcoin I don't mean a very long and unreasonable amount time. When I use time for bitcoin, I mean maximum of four years, which also represents time interval when mining rewards halving happen.
I would put four years max for bitcoin to reclaim its previous all time high price, but max time doesn't mean not the expected time. Expected time would be less than the max, and normally can be determined based on historical price action and how long it took bitcoin to go back to its previous all time highs in the past instances. Based on these assumptions, I would say to myself that within next two years bitcoin can reach its previous all time high of 67k USD. Previous ATH may be slightly different depending what sources we are looking at. Some may show 65k, others 68k, etc. I will go with safe 67k.
Based on these assumptions, if I were to buy one bitcoin at 39k and wait one or two years until it goes back to 67k and sell at this price, I would make 28k profit. That is 71% return on the investment. So, would waiting 2 years for 71% gains be worth it? Why not? 71% sounds a good investment return compared to traditional investment instruments. There is also a bonus, which often is even higher than this expected roi. Bonus is after breaking the previous all time high, bitcoin price has a tendency of going up even higher, much higher. We saw what happened when it broke 20k ATH last year. It just kept going up non-stop, until it had to stop.
Before bitcoin broke 20k levels, it was unimaginable to even think that it could go to 100k in a short period of time. Yes, it has not gone that high yet. But getting to 67k, broke many doubts that it could go as high as 100k. Today, it may be unimaginable that it will go as high as 1 million USD. But that these doubts too will be removed once we see it trading at 500k.
Let's say I convinced myself that 67k is going to happen again soon, within a year or two. The other problem is, how low can it go now? It does look like a good investment now if it goes to 67k. But if were to buy more now, and it goes to 25k next week, I could have bought even for less. There is no guarantee of how low it can go, and I can't have same kind of strong conviction as I have been making about previous all time high. Alternatively, I could use previous all time high of 20k as how low it may go. Within a year bitcoin price already went down multiple times, but hasn't even come close to 20k. Not yet. What are the chances of that?
After considering all this, there are other questions to consider. When bitcoin rallies to previous all time high price, other crypto assets also tend to follow the trend and some even perform better than bitcoin. Wouldn't considering other crypto assets that historically did well when bitcoin went up increase the potential future gains?
Perhaps, good strategy would be to keep buying and accumulating in small amounts consistently as long as the price is below previous ATH. The problem with that is when prices go really low, there isn't enough fiat left available to buy more. While I am 95% positive that this will happen again, there is still 5% unknown that may invalidate this theory. For this reason, I would never go all in and put myself in a position of financial hardship to make some profits in the future. My thoughts on this keep changing as time goes by. If you asked me a year and half ago, I would have given you a completely different opinions.
So bitcoin has proved to be a great store of value and a long term investment. What are your thoughts? Do you think its price will go back to its previous ATH? If yes, how soon? If no, what are your reasons?
Again, contents of this posts must not be interpreted as financial advice. These are just my opinions and are written for entertainment and discussion purposes only.