The Point of no guaranteed return:
Today is a very special day, for today is the day that Bitcoin ascends more than twice the yearly doubling curve.
| 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 |
|---|---|---|---|---|---|---|
| $800 | $1.6k | $3.2k | $6.4k | $12.8k | $25.6k | $51.2k |
As we can see, Bitcoin is actually worth about $13k per coin, but we are trading yet again at all time highs above $26k. Why is this the point of guaranteed return? History shows us that Bitcoin always returns to the doubling curve at least once per year, and often times it hits this moving target multiple times in that span.
This implies that we can sell here and be guaranteed to be able to buy in at a lower level sometime within the next 12 months.
We might be thinking the market is bubbled and due for a correction at this point. That is true, but at the same time that's what people said at $20k, and look what happened. Bitcoin can still reach the legendary $50k target before January is over.
Nothing about this market appears bubbled or unstable, and truth be told, I believe Bitcoin will never go under $20k ever again. Too many corporations have skin in the game and reputations to protect.
Remember Litecoin?
I wrote this post on October 22nd. Litecoin was trading under $60 and I explained why the #2 currency by age is going to go on a rampage. We see I was somewhat correct.
It looks like Litecoin is outperforming Bitcoin, but it's actually not. On Oct 22 Bitcoin was trading at $13k, so the two assets are performing about the same. However, many people are taking notice of Litecoin because sometimes it spikes 20% on days when Bitcoin only moves up 5%. Then it gets ignored when it underperforms. Classic gambler's syndrome.
However, the higher Bitcoin fees go, the more users are starting to look to Litecoin. It costs $12 to move Bitcoin off of an exchange, and only 12 cents to move Litecoin. You don't have to be good at math to see that's an exact difference of x100 in fees. Pretty incredible.
Litecoin has really good liquidity and volume. In fact, the volume is INSANE. Litecoin only has x4 more tokens than Bitcoin, but it's volume on Coinbase is usually around x50 these days. That is a gigantic difference.
Why would Litecoin volume be so high? Probably because many other users use it for the exact same reason I do. If you want to transfer small amount of Bitcoin off of an exchange it is way cheaper and faster to simply exchange that value into Litecoin, move it to another exchange, and then sell the Litecoin back into Bitcoin.
Because exchange fees are percentage based but network fees are flat, this strategy works well for transferring smaller amounts between exchanges. For example, if the $12 Bitcoin fee is more than two exchange fees plus the 12 cent Litecoin fee then it's smarter to use Litecoin... assuming you aren't worried about creating a tax event... which shows yet again how archaic our tax laws are when applied to crypto.
Litecoin's halving event never really kicked in, so I think it's going to start ramping in to high gear as we head into 2021. It's almost guaranteed to flip Tether because stable coins can obviously not compete with exponential gains during a mega bubble. In addition, it only has to gain like 35% to flip xrp at this point, so I very much expect Litecoin to be the #3 coin by market cap sometime in 2021; an impressive feat indeed.
Again, forks of Bitcoin that use mining algo SHA-256 are not secure. This is especially true with mainstream adoption coming and corporations making a huge splash. Large Bitcoin miners may turn their cannons to Bitcoin Cash to attack the network, while that is not possible with Litecoin because it uses the Scrypt algorithm. This is actually one of the big advantages of ASIC miners taking over the space; it separates the ability to attack other POW chains.
It's actually pretty hilarious to watch how mad the Bitcoin Cash community is getting because of Litecoin's success. Get used to it, gentlemen. You aren't "the real Bitcoin" nor will you ever be. Too bad, so sad. Move on.
Conclusion
Yeah, you could probably sell now and have a guaranteed chance of buying in at a lower level, but that doesn't mean you won't be kicking yourself when Bitcoin spikes even higher. Now might be a good time to take small gains like 5% or 10% of what you plan on trading with.
Personally I think it will be much more obvious when the market becomes unstable and the bull market is over. I'm still looking at that $40k-$50k range and at this point I think the peak is coming somewhere in January. One thing is certain: at some point there will be blood. I still plan on buying back in late Feb.