Bitcoin Has Surged: What Should Investors Do?

The Mt Gox and the German disposal cracked bitcoin
Bitcoin
out of its range in a manner to test even the most bullish holder, let alone anyone who fancies interpreting charts. The $60,000 level was a pretty strong line in the sand for anyone who isn’t a diamond handed, hodl till you die bitcoin Maxi.

However, bitcoin has come storming back.

Here is that gut-wrenching move:

If as a holder you weren’t frightened, as the saying goes, you clearly didn’t understand the situation.

I wrote here, because of this break, I was no longer a bull, simply a holder of crypto for portfolio diversification. I can’t say my position has changed. Here are the options:

1) Trade what you see

2) Hodl

3) Run away

I remain a pessimistic hodler.

This is what I see:

A trader would probably see a rise and buy the dips, but you have to have the speculative constitution to do this or not know that this tends to end in tears.

You can play with the range, but the strategic position is the same as it was since March. We are trading at an equilibrium point and something will need to occur to shift that equilibrium point either up or down.

You might argue that the breakdowns below $60,000 suggest a downward move is more likely than a breakout. However, splitting hairs is never a good way to invest or trade. If you know, act, if you don’t know, don’t move.

I do not know so I’m not moving.

Not all drivers of repricing are acute, often they are chronic factors grinding away to a point the price dam breaks.

With bitcoin this could be the miners. The miners are not having a good time:

Often a drop in mining foreshadow a rise in price. We are in a 20% to 30% drop in hashrate as you can see from this chart from bitinfocharts.com.

So this is both interesting and bullish. You can see that in the past a drop in hashrate occurs before a rise in price and you could say, a drop in hashrate creates a squeeze in supply.

The Mt Gox liquidation distribution of bitcoin increases supply, but the halvening shrinks it, so these are the factors driving the price right now. To me Mt Gox washes out but the reduced new supply is a given and a constant and I can’t help believing a halving of supply equates to a doubling of price, all other factors remaining equal.

So to me the way to play remains the same old same old position of hodl, watch the box and try not to get too nervous. A lot of people in crypto are trying to trade into a life-changing situation with a big win, so they won’t want the following advice. Size your position so you don’t care what bitcoin is doing from day to day. Bitcoin is now no more potent than the right stock.

I remain a believer in the potential for the halvening as the driver of a final leg. I will be sitting tight for that until something definitive happens.

Disclaimer: I own bitcoin.