I’ve been asked this question more than ever recently.
People unfamiliar with the financial markets, trading, or even Bitcoin seem to think it’s a good idea to purchase some of the mythical computer code from the blockchain in exchange for their hard earned dollars/pounds/euro’s.
I’m reminded of a piece of advice given to me from my first boss during my pit trading days in London City.
“If your taxi driver tells you to buy something, SELL!”
“You buying Bitcoin too?”
Replace the taxi driver with an Uber driver today, and the advice continues to ring true.
I approach Bitcoin like any commodity. If it’s under priced, buy it.
“But… how much is Bitcoin worth?”
It’s worth as much as someone is willing to pay. And if some bloke in Russia is willing to pay $50,000 per coin, then that’s how much it’s worth, regardless of what you think.
If you’re buying an asset, like Bitcoin, gold or a soybean contract, with the expectation that the price will rise and you’ll be able to sell for a profit. There must be a fundamental reason for the rise. Let me give you a couple of examples:
Are you expecting uncertainty in the global economy? Buy gold.
Is there a major drought in the US? Buy soybean contracts.
“Ok ok, I get that. But when should I buy Bitcoin?”
The only way you’ll make money buying Bitcoinis if there’s a bigger fool than you willing to pay more.
Remember the taxi driver? He, and the entire fleet of taxi/Uber drivers are getting on the Bitcoin train, which is the biggest indicator to me that it’s time to step off, before you ride the train right off the cliff with the rest of the dreamers.
Bitcoin has some structural issues that will prevent it from becoming a mainstream payment method. Recent gains are based purely on the bigger fool theory and I expect price to crash at some point in the future, to be replaced with a more scalable cryptocurrency.
I don’t know, and I’m not game to jump in until the market settles down. This period reminds me of the dot com crash in the early 2000’s. Back then, any company with an “e” in front of it appreciated in value, completely ignoring traditional valuation methods. All because investors were desperate to get a piece of the action.
There will always be another opportunity to make money in the markets. Don’t do something, just because everyone else is.
I’ve made my money over the past 30 years developing trading strategies that often go against the grain of my colleagues, but I’m still here, making money 30 years later.
Please come and join me in the trading room and let’s further the discussion. I’m keen to hear your opinion and show you how I’ve managed to profit from the market so consistently.