Bitcoin is probably the most exciting technology since the internet and has immense upside poential, how could I just sell it all? Well, here's the thing.
You see, I lost 65% of the value of my portfolio during the 2018 bear market. That hurt. A lot.
Sure, I made a lot of money nonetheless and that profit has covered my living costs for the best part of 3 years now with another couple years worth of living costs to go. I'm incredibly grateful for that.
Even so, consistently losing thousands and thousands of dollars over a one year period has taken its toll on me. I'm willing to risk a lot to make a lot but that doesn't mean just buying all the bitcoin I can at any price, regardless of technicals or fundamentals.
So that's what today's post is about - the technical and fundamental reasons for why I'm taking profit on my bitcoin long position. I recorded a 27 minute video explaining everything in detail. If you don't find my voice as sexy as I do, just read on instead. :)
Please note that despite my short-medium term bearishness, I have mad respect for true hoddlers, those who ride these waves up and down without selling more than what they need to live on. I wrote a post about one of those people, it's a great read if you're a HODLER and is a great contrast to this post.
Bad news for bitcoin is bad news for crypto media and crypto investors. That's why you don't hear much of it. See how many retweets you'll get for saying how you think bitcoin will crash vs saying why bitcoin will pump.
The result is that critical analysis or bearish outcomes for bitcoin are not written about as much and are less popular, especially when getting your news from popular crypto news websites with an obvious bias. The good fundamentals, however, are touted loud and wide:
"Bitcoin is decreasing its supply growth rate at the very same time that fiat supply growth is increasing! What could be better for bitcoin?!
"Famous investor Paul Tudor Jones is buying bitcoin, calling it a hedge against inflation."
"Numbers related to creation of new bitcoin addresses, use of current addresses, hash rate etc. are reaching ALL TIME HIGHS!"
"Banks are finally giving into crypto, they're offering their services to exhanges and one is even offering interest on bitoin deposits"
I'm not saying there is no truth to these statements or that any of them are irrelevant. Quite the contrary, they are bullish as ever for the King Crypto.
So, why am I selling my bitcoin regardless?
Bitcoin is currently in the very unique position of having some very strong and some very weak fundamentals. The way I see it, the positives are being talked about much more than the negatives, and the negatives present substantial risks which are not properly priced in.
"I am really quite fearful right now. One of the reasons I'm fearful is that the market seems too greedy. When people are getting greedy, overexcited and exuberant, that's usually the time you want to do the opposite and be fearful."
As myopic and simpleminded as I believe Warren Buffets views are concerning bitcoin, he does have one hell of a track record as an investor and he deserves credit for his famous quote about greed and fear which I paraphrased above.
So, let's get down it, what are my reasons for selling?
My greatest fear is another S&P 500 crash. If you look at the last two times that SPX dropped 15% or more, it coincides with a much larger drop in the price of bitcoin. As much as we love bitcoin, if most investors in the world are selling their investments, it's only natural that bitcoin will follow given that it is a new financial instrument (bitcoin has beeen around for 10 years, gold has existed as a store of value for at least 2500 years).
The number of corona virus cases worldwide have peaked in the US and Europe but the number of daily new cases are reaching new highs in countries like Brazil and Russia. However, there are two concerns that remain. One is the possibility of a second wave of cases. In the 1918 pandemic which killed many millions, the second wave was more deadly than the first. The second conern is that the world isn't going to get back to work as if nothing happened. Even if the whole world gets back to work, it will be at a diminished capacity due to all the restraints and precautions that people will have to take in order to prevent spreading of the virus.
My second greatest concern is the technicals. I don't care how bullish the price action has been over the past 8 weeks. The fact of the matter is that the weekly chart is still in a down trend. As mentioned in my video analysis,
"bitcoin crossing $10,500 will be the biggest technical analysis event of the year"
However, even then we would still not be in a confirmed uptrend. All that would do would be to invalidate the down trend. Again as explained in the video, an uptrend requires a higher high and a higher low. So, we are a long way away from a confirmed uptrend.
In addition we have decreasing volume on the way up and volume is an important indicator of the strength of a move. Finally we are very close to the important 10,500 double top resistance as well as the one year diagonal trend resistance.
I was being greedy and naive when I held onto my crypto investments once bitcoin had reached $20,000 backin 2017. At that point, I had made a 700% return on investment but I cashed out only about 5% of my portfolio into stable coins at the time. I didn't know when to take profit or how much to take.
The bitcoin I'm selling now is bitcoin that I bought at 4500, giving me a 113% profit by selling it at 9620. That's a massive profit and I don't want to be as greedy this time as I was last time.
I must admit, I'm scared of missing the next big bull run. The FOMO is real. When bitcoin pumps, it really pumps and it can be hard to find an entry point.
However, even if I'm wrong and bitcoin immediately breaks the 10,500 level and goes on to reach 14,000, I figure we are highly likely to retrace a solid 10-20% at some point during that runup at which point I can reenter. While I would be buying at a higher price, I would have much more confidence in my position than I do now.
Whatever happens, down or up, I'll still be here every day reading, writing and talking with everyone in the crypto space. Despite earning next to nothing for my work here, I'm committed to this space and to spreading the word about crypto.
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