We are seeing the Bitcoin price exploding and concurrently it brings up some altcoins as well. It's easy to get blinded by the euphoria, but this is a psychological burden most of the time. If people want to make money longterm they need to stay rational, and can't let themselves be manipulated by the joy. The number one rule of investing is to stay rational and cold blooded. If you can't do that then you are as good as your average gambler.
Let me tell you my opinion about this recent Bitcoin price increase. Many people were asking in my last posts how I came to the conclusions that I did. I usually to the math in my head, I like to be 2-3 steps ahead of people, so my thoughts may be hard to follow but rest assured there is logic behind it.
So I'll break down my reasoning this time so that people can follow:
Clue 1: Parabolic Price
It's usually never a good idea to buy when the price is parabolic, this suggests irrational traders, and more rational ones (with big budget, since you can't get rich by being a fool) will not buy, therefore only the losers will buy at the peak and wonder why they are losing money if the market goes down.
You can only get rich if you are rational and disciplined, and rich rational guys will never buy at the top, only losers do, therefore it looks like the market is in for a crash.
Clue 2: Most volume is intra-exchange (IOU)
It looks like most of the trade volume is happening inside the exchange, so it's not even Bitcoins that are being traded but worthless IOU claims, which could disappear anytime some clever hacker hacks a major exchange.
So another MTGOX or hacker moment can easily bring down the entire house of cards. Especially now that military-grade malware is circulating on the internet and black markets:
- https://www.reddit.com/r/NSALeaks/comments/6alpw4/nyu_accidentally_exposed_military_codebreaking/
- https://www.reddit.com/r/NSALeaks/comments/6at66w/an_nsaderived_ransomware_worm_is_shutting_down/
So it's just a question of time until some clever hacker finds a vulnerability and loots all the exchanges where idiots are trading air, IOU.
It is not a Bitcoin if the transaction doesn't happen on the blockchain, and it can't happen in the blockchain because the transaction fees are high, and the transaction capacity is way too low:
The 1 MB block is literally a disability to Bitcoin but somehow the smart "Core Developers" , "Core" as in they are the center of a supposedly decentralized community as just unwilling to increase the blocksize:
- https://www.reddit.com/r/btc/comments/6fmsjy/one_of_the_biggest_lie_from_one_of_the_biggest/
- https://www.reddit.com/r/btc/comments/6flr3w/yesterday_i_realized_why_segwit_fanboyz_cant/
Conclusion
Bitcoin is in a bubble, there should be no doubt about it. And as every bubble, it will pop eventually, and a lot of people could lose money. I think Bitcoin can pop anytime, because the traders are detached from reality.
As I illustrated in my previous post, the guys on /r/Bitcoin subreddit are celebrating Bitcoin's price, while the guys on the /r/BTC are actually pointing out the longterm problems. It's a total detachment from reality. And many people will lose money.
Fortunately, I think a lot of money will go into the altcoins, especially Dash, Monero and Ethereum, and big ROI profits into smaller altcoins. Just follow my #becomingrich series and see for yourself what I think about altcoins.
Disclaimer: The information provided on this page might be incorrect. I am not responsible if you lose money using the information on this page! This is not an investment advice, just my opinion and analysis for educational or entertainment purposes.
Sources:
https://pixabay.com
https://blockchain.info
