Crypto Weekend Draw Down, Time to Buy?

Today Elon Musk came out and twitted a response that spooked the crypto market. Quite literally Elon used one word. This can be comparative to the times President Trump twitted that cause markets to move instantaneously when he was still in office.

Elon prior to responding with "indeed" was putting out his opinion that BTC is currently not decentralized and by directing a link to a story about China's strangle hold on BTC mining. It was always clear for a while now that China has been a major stake holder in mining BTC for some years.

One of the reasons for countries outside China to invest more into BTC is so to remove China from its position as leader in mining BTC. The more countries getting involve the less decentralized BTC will become. Counterintuitive to what Musk is implying but it is a fact. If other countries besides China start putting in the resources to support BTC mining they can redistribute the overall mining power in a way to not have the Chinese take leadership role.

Wall of Worries

Often in the stock market when asset prices rises while bad news on the economy persists the Wall Street bankers came up with a phrase to describe this situation. The phrase it climbing the wall of worries. You may have heard this phrase spoken during 2020 or even this year as stock markets are close to all time highs while economy data is not giving the green light for its future prospects.

To time when the stock market would bottom such as what happened in March 2020 maybe a difficult one as many did not expect it to climbing far above where markets had started at the beginning of the year. The easiest way to have capitalize on the gains in the stock market was to buy every dip prior to the March 2020 bottom.

This lies similar in the current crypto market. As BTC has dropped in total more than 20% from its all time highs it is difficult to know if it has potential to fall further or that it has hit a bottom. The comments from Elon Musk may not have help BTC prices short term, but is is still yet to determine if down the road BTC will continue to fall much further. Therefore buying some and continue buying if prices fall further is a good way to invest. This is called dollar cost averaging.

There should be concerns that BTC could go all the way to zero hence even cost averaging into an investment is not full proof.

FOMO

There are those who saw how quickly crypto rose higher in price through the months and may wish to join in on the bull run. This may have ended or it may not. Not going to be clear until the price of BTC decides to continue lower or go higher from here. One good gauge to know if you are FOMOing into an investment is realizing how strong are your emotions when you are trading.

For instance if you are exciting to buy just because you want to it will likely be FOMO into the investment. Rather looking at a logic perspective and thinking through your investment prior to investing will appear to be a sound judgement towards your investments. If you ever get too emotion please avoid trading as it will likely impair your judgement on investing.

Would I Buy Now?

Honestly I would hold off buying here. The Elon Musk twit although looks minor and can be interpreted in many different ways, there is fear in the crypto market to hold long as prices are falling. What is not to say there could be another twit coming from Musk in the next hour that will bring even more pressure on prices. It just seems to worrisome to have BTC drop almost 10% in hours due to one twitted word from Musk. This is not a stable market right now.

None of what I write is financial advice. It is for entertainment purposes only. Thanks for reading!