Panic in Bitcoin? That’s a Buy Signal

Matthew Carr By Matthew Carr, Emerging Trends Strategist, The Oxford Club

Commodities

Some investments aren’t for the faint of heart… but they intrigue me nonetheless.

For example, I love options. But the intraday moves can spark anxiety attacks.

If you’re one of those investors who sits there and watches your portfolio value tick up and down minute by minute, day after day, options could send you to an early grave.

The highs and lows will keep you up at night.

And then there’s bitcoin.

The cryptocurrency has a well-deserved reputation for taking investors on a tremendous ride and then suddenly bucking them from their saddles.

It can lose 40%, 50% and even 90% of its value in the blink of an eye.

But knowing this is key – as is having the vigilance to attack at lows.

For example, at the start of 2011, bitcoin was trading at $0.30. By June 8, 2011, bitcoin was at $29.60.

That was an increase of 9,766% in six months!

But five months later, bitcoin had lost 93% of its value and was back at $2.05.

By November 2013, the cryptocurrency had rocketed to $1,037… and by January 14, 2015, it was down 83% to $177.

Today, bitcoin is trading just under $4,000.

That means a $10,000 investment in bitcoin in January 2015 would be worth $223,583 today…. and that’s even after the pullback over the past month.

Investors are dusting themselves off and climbing back into the saddle.

But the cryptocurrency is taking criticism from high places…

JPMorgan Chase CEO Jamie Dimon torpedoed bitcoin as a fraud. He told investors that the cryptocurrency’s volatility demonstrates it’s worth nothing.

Mohamed El-Erian, the chief economic advisor for Allianz, warned that bitcoin was overvalued.

All of this was said after the currency had an epic month – one of surges, drops and rebounds. These are the types of moves that make bitcoin a notorious moneymaker.

If you’ve been following bitcoin here at Energy & Resources Digest, you’ve been positioned for the rapid move higher.

I’ve done my best to alert you here of when to take advantage of the dips…

In fact, in July 2016, I told investors to expect a bitcoin ramp-up in price when the rewards for mining bitcoin were halved, as per the design of bitcoin’s creator, Satoshi Nakamoto.

Since then, its price has climbed 507%.

At the end of July 2017, I told investors about bitcoin’s “Independence Day” – when the cryptocurrency forked into two separate commodities: bitcoin and Bitcoin Cash.

I said that investors should expect a boom… and that’s exactly what we saw.

From August 1 to September 1, the price of bitcoin soared 81% higher

On September 1, bitcoin surged to an all-time high of $5,013, ballooning its market cap to $81.9 billion. This pushed the market cap of all global cryptocurrencies to an astounding $179 billion.

At the same time, the Bitcoin Investment Trust (OTC: GBTC) soared even higher…

From August 1 to September 1, the Bitcoin Investment Trust outran bitcoin, gaining a remarkable 142%.

Shares went from $415.24 to an all-time high of $1,064.95.

And then it all came crashing down – at least for the moment.

At the start of September, China announced it was cracking down on bitcoin exchanges. Then, two well-known exchanges – BTCC and ViaBTC – closed.

The result was a sudden and devastating drop in bitcoin’s price as well as Bitcoin Investment Trust’s shares. It was a classic case of panic-selling.

Over a two-week span, the trust’s share price tumbled 48%. Meanwhile, the price of bitcoin fell 38.4%.

But as we’ve seen time and time again, once the bad news was out of the way, investors moved on.

The cryptocurrency has gone from $0.30 just a handful of years ago to around $4,000 today.

Whenever bitcoin dips, the hardcore bitcoin believers step in and buy big. Recently, they’ve been joined by a bevy of investors who were sitting on the sidelines, waiting for a dip to happen.

I believe Dimon is dead wrong. I don’t believe bitcoin is a fraud or that it’s worth nothing. There’s a finite amount of available bitcoin. And investors love scarcity.

For those looking to get started in bitcoin (if you haven’t already), understand this: It’s an investment in which volatility is your ally.

There will be another surge upward at the beginning of November, when bitcoin forks yet again…

Good investing,

Matthew

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