Forum Topics Bitcoin - How to assess
navrock1
Added a month ago

Hi All,

Wanting to write down some notes so I am not just sponging off everyone here constantly. Will keep it brief but please feel free to build on and ask more.

'How to Identify a Good Time to Buy Bitcoin'

This is the name of the section of the book I own called A Beginner's Guide to High-Risk, High-Reward Investing by Robert Ross (TikStocks). I subscribe to him also and so far so good.

The book recommends looking at:

  • Net Unrealised Profit and Loss (NUPL): Basically, an indicator with a great track record and a reading of 75%+ coincided with the last five 'tops' in the price. In reverse, <0>
  • Bitcoin Dominance: % of the "crypto" market that is bitcoin. "Historically when bitcoin dominance falls below 40% of the cryptocurrency market, its a good time to buy bitcoin. And when it rises above 65%, its a good time to take profits"
  • Unique Wallet Addresses: "Keeping track of the number of new addresses created (and how many are active) is a great way to measure cryptocurrency sentiment".


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Strawman
Added a month ago

My 2 sats @navrock1 is that "taking profits" on Bitcoin is very risky. Or, more accurately, misunderstands the point.

Ultimately, it's either a niche curiosity or a foundational layer of global finance. Or, perhaps, it just plateaus after absorbing a decent fraction of gold's market cap.

If it's the first option, there's probably limited upside from here long term, and all you can hope is to speculate on the volatility. Ie. A mugs game.

If it's one of the other two options, it's at least a 5-10x in the coming decades or so. Maybe 100x in time. In which case, taking profits at anything under US$500k/coin is something you'll likely regret.

Framed differently, if you think of it as a superior monetary asset, switching back to an inferior alternative makes no sense. Eg. No one in Argentina buys USD with the intention of taking profits as the peso is further debased. It's a one way door, as no sane person ever switches from USD to Argentinian pesos for investment reasons.

You don't buy Bitcoin to make money. It is money. And it's only worth exchanging your AUD for if you think it will better preserve (and, indeed, grow) your purchasing power. Which it will *if* adoption continues to grow and achieve a much higher level of penetration.

So that's the thing you need to form a view on. If you think we are on a path to mass adoption (albeit in a messy, volatile and gradual manner), buy and hold.

If you don't, it's only a speculative play thing and probably best ignored.

There are so many stories of people "taking profits" as this thing has grinded it's way from US$1 to US$100,000, and none of them good (even if it seemed that way for a short time).

Anyway, sorry for the ramble. It's a weird thing, and requires a totally different framing than you'd use for a stock or property etc.

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navrock1
Added a month ago

Totally agree @Strawman. Never apologise for a good ramble that shares learning. Long time Motley Fool listener to know where you stand on the one coin to rule them all haha and I practice the same IRL with Bitcoin (been holding over a year now since I drank the cool aid)

For me I guess I want to learn how others might be assessing Bitcoin in general. Ie . What are you looking at to know your thesis is still intact. Open to feedback always.

I just found the above interesting as whilst not from the school of trading myself, I still learnt a thing or two. Eg. If I am overweight Bitcoin without as high a conviction I might see the NUPL and sell off a small portion short term (an example only).


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Strawman
Added a month ago

For sure @navrock1 and I think things like wallet addresses are a great way to gauge adoption. Definitely a number you want to see grow!

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