Bitcoin is on its way to the moon no doubt but its funny how history repeats itself within financial markets. Today we have seen bitcoin reach all time highs. For people who have invested in cryptocurrency before 2017 its been life changing. As of 2017 bitcoin has to crept into mainstream media with people around the world capitalizing on these significant gains. I have no doubt cryptocurrency has firmly cemented its place within the global financial markets and will transform numerous industries. These new highs may continue to $5000,$10000 or beyond by the end of this financial year. The reason I have stopped purchasing bitcoin at these highs is due to two graphs:
Source: marketwatch
As an early investor this is a dream come true. The percentage gained has outdone any financial markets in the past. However looking at the graph above I believe there will be a better opportunity to invest in bitcoin for the purpose of long term growth. In order to do so we must identify the phase bitcoin is currently in.
In early 2009 bitcoin was in stealth phase. The few that stumbled upon blockchain and had the awareness to see the big picture and built the industry as we know it today.
The awareness phase began in 2013 where we experienced the first sell off. For the last quarter in 2013 the bitcoin price surged from $120 to around the $1100 mark. This was followed by a slow puncture correction where prices decreased to around $200 followed by slow growth over a year.
The mania phase began in 2016 where cryptocurrency first gained media attention. We are still in the mania phase somewhere between enthusiasm and delusion. By analyzing the two graphs above I believe the cryptocurrency markets will follow the same pattern as financial markets in the past. This is gold for an active trader as the risk can be mitigated and downtrends are just as profitable if your smart and do your research. For a long term investor its better to hold bitcoins acquired in the awareness phase and patiently wait for the blow off to further invest at various targets on the way down.