Bitcoin Will Crash…
And that’s when you should buy it
On January 4, one bitcoin cost $28,383.16. Briefly, on Tuesday night, it surpassed $51,000 per coin.
On March 13 of last year, one bitcoin cost $3,925.27. Today, it’s worth nearly $51,000.
That gives the cryptocurrency a 70% gain year-to-date and a 1,140% gain over the past 52 weeks.
Looking at how fast the gains are coming now, you’d think we’re in an all-out race to $100,000 per coin. But if you looked at Bitcoin’s history, you’d realize we’re probably closer to hitting $25,000 per coin than $100,000.
You see, Bitcoin is a volatile asset... and it always has been.
A History of Heartburn
Literally ever since Bitcoin first came on the scene, it’s been incredibly volatile.
It was created in 2009 but first really started trading hands in July of 2010. That month, it went from $0.0008 per coin to $0.08 per coin. That’s a 9,900% move in just a few days.
But then, just as fast, it cratered back down to about a penny per coin.
The following spring, in April 2011, one bitcoin cost $1. By June of that year, one bitcoin was worth $32 — a 3,200% gain in just three months. But the euphoria didn’t last long. By November of that same year, the price had cratered back to $2.
Two years later, Bitcoin saw two massive price bubbles that both eventually popped. It started 2013 trading for $13 a coin and by the start of April was selling for $220 apiece. But midway through that month, prices had dropped all the way back to $70 a coin.
Prices started to rise again shortly after, and by October of 2013, a bitcoin was changing hands for $123. By December, that number had ballooned to $1,156. Three days later, it had slumped back to $760.
For the next couple of years, Bitcoin’s price slid lower and lower until it hit a low around $315 at the start of 2015.
Prices were up and down, but in a relatively tight range, for the next two years. However, in 2017, another bubble started to develop. At the start of the year, the coins were holding around $1,000 each.
Between the end of March and the middle of December, they went on a run from $975 to over $20,000.
It would be another three years before the price even got close to $20,000 again.
But now here we are. Bitcoin passed $20,000 late in 2020, and now it’s pushing $51,000 in early 2021.
And if history is any guide, we’ve got a pretty massive correction coming our way. I’m not talking about a stock market correction of 10% either.
Bitcoin grows fast and it falls just as quickly. After a 100% rally, it’s not uncommon to have a 50%, 70%, even 80% drop in the price as short-term investors take profits and the rest of them decide whether buying Bitcoin was such a great idea to start.
And that’s when you should be buying Bitcoin (if you’ve been considering it). In finance, we buy LOW and sell HIGH, and that’s how we make a profit.
Right now, Bitcoin is very high. History says it’s going to give us a big correction and a much better entry point if we’re patient.
Back to the Pump
The thing is I can’t tell you exactly when that crash is going to come. There’s an old adage I’m sure you’ve heard: The market can stay irrational longer than you can remain solvent.
Basically, it says that you might be right and the market might be wrong, but the market might end up being wrong longer than you’re able to bet against it.
And went you’ve got billionaires with millions of loyal Twitter followers pumping the currencies after they make investments, the rally could last even longer than any of us expect.
But let’s be completely honest, the catalysts are mostly that more people will buy more coins at this point. Sure, it’ll be a currency you can spend one day. And maybe it’ll be a store of value like gold has been for so long.
For now, the main thesis I’m hearing is that it’ll keep going up because people will keep buying it — and not just people, but big institutions too.
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The thing about that is those institutions aren’t looking to buy a top. They’re going to want to get their Bitcoin at a better price. So as long as the price keeps soaring, they’ll keep their treasury in USD.
To be honest, what long-term Bitcoin bulls should be praying for is a strong correction. A 50% drop would give those institutions that are on the fence a much better reason to commit.
But the market can remain irrational longer than you can remain solvent (or, in this case, longer than you can remain detached). FOMO is a powerful drug, so I understand why people are seeing the rally and feeling like they’ve got to get on the train before it leaves the station.
You just have to remember this train leaves the station only to reverse back in and pick up more passengers. It’s what it has done since it was created, and it’s what it’ll do until it’s a mature asset class.
And you can take advantage of that.
Bitcoin, cryptocurrencies, and blockchain are here to stay. Long-term investments in the coins or the technology behind them are likely to be profitable (even if you get in at a short-term peak).
But the volatility is real, and it’s pretty spectacular to behold. You can make that work to your benefit.
Let the unsophisticated investors fall victim to FOMO. The higher they drive the price above its fundamental value, the bigger the dip you’ll get to buy when the correction comes.
But if you’re a long-term believer in cryptos and blockchain like I am, don’t go rushing to sell all your bitcoins just yet. There have been a ton of crashes throughout the past, but the trend is higher.
I just think we’re more likely to see Bitcoin at $25,000 again before we see it hit $100,000 for the first time ever.
To your wealth,
After graduating Cum Laude in finance and economics, Jason designed and analyzed complex projects for the U.S. Army. He made the jump to the private sector as an investment banking analyst at Morgan Stanley, where he eventually led his own team responsible for billions of dollars in daily trading. Jason left Wall Street to found his own investment office and now shares the strategies he used and the network he built with you. Jason is the founder of Main Street Ventures, a pre-IPO investment newsletter, and co-authors The Wealth Advisory income stock newsletter. He also contributes regularly to Wealth Daily. To learn more about Jason, click here.
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