Bitcoin - Finding The Perfect Entry Price for Your Pet Rock
Updated
The recent move has been positive for the space overall, with Litecoin' actually leading the rally. Yet over the past couple days, the market has been just jerking around not doing much one way or the other. There are some signs of renewed interest in the market, with individual coins like Dash or Ethereum' breaking out and pushing shorter term highs.
In addition the NASDAQ has announced it will be adding Bitcoin' and Ethereum' indexes to track crypto currency trading prices. This is another paver laid on the path to a potential ETF'. So with another SEC commissioner stating publicly that eventually a Bitcoin' ETF' will meet the criteria the SEC set the big question is "Where do I add"? But first some technicals.
Technically the bullish swing may be a sign of an initial recovery. For a couple months we have been telling our followers that bottoming is a process and to be cautious buying an initial rally as we likely get an opportunity to buy back here or even lower. This requires patience and discipline of which many simply do not have. In an era of instant gratification, people want instant results. They buy and get discouraged when the market does not just go up up up and up and sell at the worst times. This is silly as markets fluctuate with the sentiment of the participants. They are simply kids in a candy shop and used to getting what they want when they want and when it does not go their way they whine.
News release "MARKETS DON'T GIVE PARTICIPATION TROPHIES"
There is no concern here as Bitcoin' consolidates after an initial impulse move. Markets seldom go straight up, and as long as the 3485 level holds we consider this an initial wave.
Unless Bitcoin' pushes to the lower 3400 levels we remain bullish in the near and mid term. The next level of resistance is found at 3825 where we will look for a broader consolidation, and until we push through the 4200 level we are not out of the woods. Sure we could pullback and retest the lower 3k area, but nothing on the current chart is telling us this is likely in the near future.
There is no duck pattern or flying albatross that will provide a peek into the future, we look at structure. For months now we have been comparing Bitcoin's correction to gold and the pattern has held pretty tightly. Times may change but history repeats and the market participants of today are no different than those in the past. The gold chart and sentiment surrounding gold is very similar to that surrounding Bitcoin'. Case in point, many consider gold a "pet rock" with no real value, however history has proven them wrong time and time again.
If you could go back in time would you look to buy gold' at 250-500 an ounce? Sure you would and you had several years to do it, but few did because gold was simply hated. It had no value and many still today consider it a "Pet Rock". However those that had the grit and discipline to add here and there on dips, were paid off when sentiment returned to the market. Even had they bought at the peak in 1980, had they simply cost averaged in over the years, they would have greatly reduced their per ounce cost and been sitting with a stack when the bull market resumed.
However there are many that look instant gratification and had that "gut feeling" that they would get another chance at a lower price as gold slowly moved higher. Yet lower never happened. Finally because they felt they were missing out they bought the end of the rally. This is the typical market mentality "I want to buy now and see 100% in a month". Well the reality is those are rare occurrences and few have the grit and gut to buy when those opportunities arise. For those that read my article on Litecoin back in December when the market looked horrible, I wrote about the Contrarian Trader and how it took guts and grit to be one. You have to step in front of an oncoming train and have the gut to take the pain of going lower. Litecoin' was the perfect contrarian trade there, and those that had the guts to buy were rewarded with, well nearly 100% in a couple months.
To be transparent I did not buy. However the question is "should I buy here, or will I get a better price"?
The problem with getting the best prices is you either have to just put Limit Orders in and hope they fill, or have the gonads of Godzilla and step in front of a moving freight train. Yet the tendency of a they typical investor is "boy I wish I would have bought at 3500" and when it gets there they question themselves "ohhh this looks terrible maybe it goes to 2500", and they never step in until they are confirmed by the market.
What do I mean by confirmed by the market?
Quite simply, part of our DNA makeup as humans creates a Confirmation Bias of wanting those around us to agree. Typical herd mentality where if the rest of the herd is grazing here, it must be safe so I will graze to. Or the employee that is always looking for confirmation from others that the job they did was right. Investing is no different, and most investors fall into the confirmation trading mentality where they only feel "safe" when everyone around them tells them it is safe.
There will never be a signal, other than a blood bath, that gives you a perfect entry for buying. Of course during those times few have the gonads to step in. So we wait for confirmation by others that it is ok to buy. Well just look across TV and one day its going to the moon, the next it is capitulation into the Abyss. Over the years I have found that it is just best to buy when it is low and forget about the rest. I have no issue buying on a pullback if I believe in the long term the equity moves higher. I use risk management, which we emphasize over and over, to insure I have money in the event it pulls back further. I welcome a better buying opportunity as am in no hurry to sell tomorrow.
Lets say I bought over the past year at 13k,9k,7k,5k,3500 using dollar cost averaging. My current average cost would be 6122. Heck that is not too bad, but lets say I step it up here and double my capital size and buy another round here. This reduces my cost down to 5101. NICE! Had you done the same thing with gold, your average cost would have been in the 300-400 area. By 2012 you would have made nearly 500-600%. Not bad, and those that waited? Well they were the ones buying at 16k and lost their butts. They waited for herd confirmation and the cries for 3500 gold to get them running into the market.
In closing you need guts, grit and LUCK to buy at the perfect price. For the rest of us that are missing one of those three qualities of the perfect market timer, cost averaging is not a bad way to go. We may not be in at the best price, but if and when the bull market resumes we are not second guessing where to get in, we are already reaping the benefits of a bullish market. Whether Bitcoin becomes mainstream, well, only time will tell, but I remember many calling gold "an expensive pet rock" back in the 90's.
In addition the NASDAQ has announced it will be adding Bitcoin' and Ethereum' indexes to track crypto currency trading prices. This is another paver laid on the path to a potential ETF'. So with another SEC commissioner stating publicly that eventually a Bitcoin' ETF' will meet the criteria the SEC set the big question is "Where do I add"? But first some technicals.
Technically the bullish swing may be a sign of an initial recovery. For a couple months we have been telling our followers that bottoming is a process and to be cautious buying an initial rally as we likely get an opportunity to buy back here or even lower. This requires patience and discipline of which many simply do not have. In an era of instant gratification, people want instant results. They buy and get discouraged when the market does not just go up up up and up and sell at the worst times. This is silly as markets fluctuate with the sentiment of the participants. They are simply kids in a candy shop and used to getting what they want when they want and when it does not go their way they whine.
News release "MARKETS DON'T GIVE PARTICIPATION TROPHIES"
There is no concern here as Bitcoin' consolidates after an initial impulse move. Markets seldom go straight up, and as long as the 3485 level holds we consider this an initial wave.
Unless Bitcoin' pushes to the lower 3400 levels we remain bullish in the near and mid term. The next level of resistance is found at 3825 where we will look for a broader consolidation, and until we push through the 4200 level we are not out of the woods. Sure we could pullback and retest the lower 3k area, but nothing on the current chart is telling us this is likely in the near future.
There is no duck pattern or flying albatross that will provide a peek into the future, we look at structure. For months now we have been comparing Bitcoin's correction to gold and the pattern has held pretty tightly. Times may change but history repeats and the market participants of today are no different than those in the past. The gold chart and sentiment surrounding gold is very similar to that surrounding Bitcoin'. Case in point, many consider gold a "pet rock" with no real value, however history has proven them wrong time and time again.
If you could go back in time would you look to buy gold' at 250-500 an ounce? Sure you would and you had several years to do it, but few did because gold was simply hated. It had no value and many still today consider it a "Pet Rock". However those that had the grit and discipline to add here and there on dips, were paid off when sentiment returned to the market. Even had they bought at the peak in 1980, had they simply cost averaged in over the years, they would have greatly reduced their per ounce cost and been sitting with a stack when the bull market resumed.
However there are many that look instant gratification and had that "gut feeling" that they would get another chance at a lower price as gold slowly moved higher. Yet lower never happened. Finally because they felt they were missing out they bought the end of the rally. This is the typical market mentality "I want to buy now and see 100% in a month". Well the reality is those are rare occurrences and few have the grit and gut to buy when those opportunities arise. For those that read my article on Litecoin back in December when the market looked horrible, I wrote about the Contrarian Trader and how it took guts and grit to be one. You have to step in front of an oncoming train and have the gut to take the pain of going lower. Litecoin' was the perfect contrarian trade there, and those that had the guts to buy were rewarded with, well nearly 100% in a couple months.
To be transparent I did not buy. However the question is "should I buy here, or will I get a better price"?
The problem with getting the best prices is you either have to just put Limit Orders in and hope they fill, or have the gonads of Godzilla and step in front of a moving freight train. Yet the tendency of a they typical investor is "boy I wish I would have bought at 3500" and when it gets there they question themselves "ohhh this looks terrible maybe it goes to 2500", and they never step in until they are confirmed by the market.
What do I mean by confirmed by the market?
Quite simply, part of our DNA makeup as humans creates a Confirmation Bias of wanting those around us to agree. Typical herd mentality where if the rest of the herd is grazing here, it must be safe so I will graze to. Or the employee that is always looking for confirmation from others that the job they did was right. Investing is no different, and most investors fall into the confirmation trading mentality where they only feel "safe" when everyone around them tells them it is safe.
There will never be a signal, other than a blood bath, that gives you a perfect entry for buying. Of course during those times few have the gonads to step in. So we wait for confirmation by others that it is ok to buy. Well just look across TV and one day its going to the moon, the next it is capitulation into the Abyss. Over the years I have found that it is just best to buy when it is low and forget about the rest. I have no issue buying on a pullback if I believe in the long term the equity moves higher. I use risk management, which we emphasize over and over, to insure I have money in the event it pulls back further. I welcome a better buying opportunity as am in no hurry to sell tomorrow.
Lets say I bought over the past year at 13k,9k,7k,5k,3500 using dollar cost averaging. My current average cost would be 6122. Heck that is not too bad, but lets say I step it up here and double my capital size and buy another round here. This reduces my cost down to 5101. NICE! Had you done the same thing with gold, your average cost would have been in the 300-400 area. By 2012 you would have made nearly 500-600%. Not bad, and those that waited? Well they were the ones buying at 16k and lost their butts. They waited for herd confirmation and the cries for 3500 gold to get them running into the market.
In closing you need guts, grit and LUCK to buy at the perfect price. For the rest of us that are missing one of those three qualities of the perfect market timer, cost averaging is not a bad way to go. We may not be in at the best price, but if and when the bull market resumes we are not second guessing where to get in, we are already reaping the benefits of a bullish market. Whether Bitcoin becomes mainstream, well, only time will tell, but I remember many calling gold "an expensive pet rock" back in the 90's.
Note
This comment definitely hits the Troll Bag comment of the week "Lets say I bought over the past year at 13k ,9k,7k,5k,3500 using dollar cost averaging. My current average cost would be 6122. Heck that is not too bad, but lets say I step it up here and double my capital size and buy another round here ---- thats almost 50% loss. Hedge funds do not loose more then 10% per capital. Who is intellectually incapacitated, me or you?"I can not wait to respond, but this is one of the best comments we have had.
Note
Litecoin is showing some strength here and if it can push the 45.0 level it would be a sign the market is attempting to build strength. This is not the only reason I say this there are a few other pieces of evidence that are signaling we may have put in a bottom. Nobody knows for sure, and anything can happen, but the market is setting itself up for a rally.Note
Bitcoin's structure is not as formed as Litecoin's and it has not pushed through the bearish trend line yet. I still favor Litecoin here just based on chart structure alone, yet look for Bitcoin to rally as well.
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