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Tuesday, May 28, 2024

Two Reasons Bitcoin Investors Buy Into Strength

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In a recent interview with Bloomberg Television’s Katie Greifeld, Saylor said,

“I’m going to be buying the top forever. Bitcoin is the exit strategy. It is the strongest asset.”

As Bitcoin’s price soared around the $65K mark and near its previous record high, it may pull back some to correct. But most analysts like Galaxy Digital CEO Mike Novogratz expect it to continue rallying to new record highs in 2024. Here are three reasons why many Bitcoin investors buy on the way up.

Each New ATH Dwarfs The Last

Bitcoin generated its first tokens on Jan. 3, 2009, with the Genesis block and cuts the supply of new issuance in half every four years. It has historically soared in price to a new record high around a year after each supply halving at the top of a voracious bull market. Each new record dwarfs the last:

  • Dec 2012 ATH (after 2012 halving): $1.1K
  • Dec 2017 ATH (after 2016 halving): $20K
  • Nov 2021 ATH (after 2020 halving): $69K

Buyers with a long time horizon of four years or more, before they want to trade, sell, or spend their Bitcoin, can find their record-high price purchase looking like a bargain in just four years’ time if the trend holds up.

Exit Strategy

Many Bitcoin investors find it beneficial to buy all the way up to – and through or including – the top, whether they are “get it and forget it” dollar cost average savers like MicroStrategy or more actively manage their exposure to Bitcoin prices.

“What we see right now is Bitcoin has just emerged as a trillion dollar asset class, and it’s alongside names like Apple, and Google, and Microsoft, but the difference between Bitcoin and the magnificent seven is that Bitcoin is an asset class. It’s not a company,” Saylor told Bloomberg.

“There’s not enough room in the capital structure of those companies to hold ten trillion or a hundred trillion dollars worth of capital,” Saylor went on. “So Bitcoin is competing against gold, which is 10X what [Bitcoin] is right now. It’s competing against the S&P index. It’s competing against real estate, a hundred trillion dollar-plus asset class, as a store of value.”

Many Bitcoin investors reason each satoshi (the smallest unit of Bitcoin) is truly precious. If Bitcoin is the paradigm shift that the MicroStrategy chief believes it is (along with many notable figures such as Peter Thiel, Jack Dorsey, and Tim Draper), then buying and “holding on for dear life” (HODL) makes sense.

Buying on the way up is also good for investors who plan to exit at peak price levels before and at the beginning of a long-term correction trend to capture profits from this cycle and accumulate more Bitcoin by using the profits to begin accumulating again at the lower end of the cryptocurrency’s multi-year price range.

Buying right up to and including the top makes investors using this strategy more sensitive to exiting on time to avoid losses.

In stocks it is a fairly conventional strategy to simply “let the trend be your friend,” and move in the general direction of the market.

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