Bitcoin soared to new highs today, hitting a high of $23,750 just after midnight on December 17, 2020. The rise has been meteoric this winter, after quite a rollercoaster ride in February and March. Bitcoin began the year at $7,174, and dropped as low as $3,858 in mid-March when the U.S. economy imploded. Since October, Bitcoin has doubled in value.
What Sparked the Spree?
Square announced a $50 million Bitcoin purchase on October 8, 2020 (1% of Square’s assets). This month, the majority of Jack Dorsey’s tweets and retweets have been related to Bitcoin. On October 21, 2020, Paypal announced that the company would allow accountholders to buy, sell and hold cryptocurrency. The plan is to make cryptocurrency available as a payment to Paypal’s 26 million worldwide merchants. Square’s investment has already doubled.
Cryptophiles swooned on the news. On October 26, 2020, JP Morgan Global Markets Strategy group noted that Bitcoin might double or triple based upon Millennial investors who view it as a hedge against a weak dollar – a replacement for the role that gold traditionally plays. At the time, Bitcoin was trading in the $13,000/coin range. In the same JP Morgan research note, analysts worried that profit-taking might make the coin vulnerable in the near-term.
Beware of Profit-Taking
Profit-taking spoiled the party the last time Bitcoin soared to $20,000/coin. Bitcoin hit $20,000 a coin in late December of 2017. Hedge funds and institutional investors sold en masse. By February 7, 2018, the value had dropped to $7,575.76. Most Main Street Bitcoin traders were not able to execute a trade at the high, due to preferential treatment that is given to registered investors.
What Strategy Works for Volatile Investments like Bitcoin?
In a world where Bitcoin can be worth $4000 in March and $23,000 in December, your best strategy remains using the hot slice system of our nest egg pie charts. Being on the wrong side of an all-in trade can destroy your next decade. (There were Bitcoin suicides in 2018.) Having a slice or two of cryptocurrency in your diversified investment portfolio, with a system of rebalancing 1-3 times a year, is a buy low, sell high system on auto-pilot. When your one or two hot slices become four, then you simply sell high and trim it back to one or two slices again. If you still believe in Bitcoin, then stay invested, within reason. The nest egg pie chart system suggests limiting your “hot” slices to four of ten slices.
Did you feel like buying more Bitcoin when it dropped to $4000/coin? The rebalancing system can prompt you to do that because when a slice gets thin, it prompts you to buy more at a lower price to fill up the slice. When you’re just watching your asset go up and down in value, wondering what to do, your emotions get jacked all over the place. If the value goes down, you don’t feel like buying because now you’re just hoping to make up losses. When the value goes up, you worry about selling too early. When you have a simple, effective strategy, then adhering to the age-old, time-proven plan of buying low and selling high becomes easy to do.
Click to customize your own nest egg pie chart. Learn more about the value of Rebalancing in my blog. (Click to access.)
All Cyrptocurrencies Are Not Created Equal
There have been Bitcoin Club scams and many crypto criminals. Click for a report in 2017 on popular clubs that proved to be ruses. A search on Trade Coin Club and Joff Paradise reveals ample warnings from burned believers. Investopedia has a blog listing 5 Common Bitcoin Scams. Coinbase is a reputable place for wallets and trading. Square and Paypal are also supporting Bitcoin.
Coinbase has over 100 cryptocurrencies listed. JPM Coin was launched by JP Morgan. Venezuela launched the Petro Coin December 3, 2017. That coin was supposed to be backed by the country’s oil, gasoline, gold and diamonds. In August of 2018, Reuters discovered that there wasn’t an office or website for the Petro Coin. Imagine the risk of the coin that is launched by someone you’ve never heard of, or is solicited through an email blast.
Bitcoin is a very volatile investment and all cryptocurrencies have been on a rollercoaster ride of gains and losses. Currently, cryptocurrencies are a trader’s paradise, not a viable currency. You can’t have a currency that is worth $4,000 one month and $23,000 another. If you’ve doubled or tripled your investment, now could be the perfect time to capture profits, while keeping a hot slice that can continue to increase in value. In the event that hot slice implodes and Bitcoin drops to $4000/coin again, you’ll feel more confident buying more at a lower price because you captured gains at the high. That is how annual rebalancing with proper diversification becomes a buy low, sell high plan on auto-pilot. It is also the only way you can take your emotions out of investing and rely upon a time-proven plan.
The Coinbase IPO
Coinbase is planning an IPO for 2021. The valuation in a 2018 funding round was $8 billion. It is unclear if Coinbase will use a SPAC to list, or will host a traditional IPO and roadshow. More news to come as the story develops.
Are you interested in an easy-as-a-pie-chart nest egg strategy that earned gains in the past two recessions and has outperformed the bull markets in between? Call 310-430-2397 or email info@NataliePace.com to register for our Jan. 16-18, 2021 Online Investor Educational Retreat.
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Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.
ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.
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About Natalie Pace
Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 4th edition of The ABCs of Money was released on October 17, 2020.
Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden.
Natalie Pace is the co-creator of the Earth Gratitude Project and the author of The ABCs of Money, The ABCs of Money for College, The Gratitude Game and Put Your Money Where Your Heart Is. She blogs on Huffington Post and Medium, and is a frequent guest contributor to national news shows and magazines. She has been ranked the No. 1 stock picker, above over 830 A-list pundits, by an independent tracking agency, and has been saving homes and nest eggs since 1999.