So this past week in the crypto world has been nuts and I just want to write out my thoughts on the whole situation. So much drama! Everyone was so excited when Elon hopped on the bitcoin train a few months ago and even had Tesla buying bitcoin as a reserve currency on the balance sheet.
Then all of a sudden during the latest Tesla earnings report we come to find out they sold a portion of their holdings for a profit.
Now I’m not accusing of Elon of managing earnings, but I think past behaviors and this bitcoin situation would say otherwise. Fine! I’m accusing of Elon manipulating earnings haha
Before joining the S&P 500 those EV credits we’re always coming in just enough each quarter to make Tesla profitable 🙂
So them selling some bitcoin to increase their earnings is in line with Tesla behavior.
But then came the environmental tweet which actually made me laugh.
Oh now Tesla cares about the energy usage around bitcoin’s proof of work and no longer will be using it to allow customers to buy cars. Seems a little suspicious when the company bought $1.5 billion dollars of it months ago. They made that kind of investment without diving into any understanding how how mining or proof of work actually works. Give me a break!
Also over a past few month’s Elon has been consistently pushing this whole dogecoin meme pretty hard as almost to try to convince people it can be pivoted from a meme coin to being the next bitcoin. Then it all pretty much came clear than Elon once again is playing games in the market and using influence to push certain assets up and down.
Don’t get me wrong, it’s all entertaining. But it does seem childish from a billionaire who is also running multiple billion dollar companies.
Now you can’t be that person that blames Elon for all the price action in the crypto markets because that is just as ridiculous. The drama above though shows how volatile the asset is even with a sticker price in the tens of thousands of dollars.
Bitcoin moves! Regardless of Elon or anyone else’s influence, bitcoin will have pullbacks of this magnitude on a regular basis in both bull/bear markets. At the end of the day, bitcoin will continue to run and doesn’t care if it has the stamp of approval from techno king Elon Musk.
Now I don’t often talk about my plans in my crypto portfolio because the strategy is quite simple. I buy and hold Bitcoin (BTC), Ether (ETH), and some Chainlink (LINK). When the % of my net worth becomes too high for my risk tolerance I trim the position back.
So far the strategy has worked wonders as it allows me to trim when the markets are euphoric and continue to dollar cost average during times where the bear attacks and bitcoin is supposedly dead. The strategy is just basic risk management and strips my emotions on the roller coaster that is crypto investing.
As for timing the cycles of boom and bust, the best I’ve seen is the stock to flow model that shows based on the halving cycles where bitcoin may track in price based on it’s predictable decrease in mining rewards over time.
Here is the current chart of where we are at on the stock to flow model. It shows that with over 1000 days till the next halving we are nearing the end of the bull cycle but there is still room to make a move higher.
Once again the past isn’t indicative of future results…but I’ll give this graph props for being spot on more or less over the past 9 years. So I’ll take a look at it 🙂
That’s kind of why I think we may still see $100k for bitcoin and more rallies when it comes to crypto in 2021. At some point in 2022 I think we start to see more of a sell off in crypto if we extend too much in 2021.
But I do get a little worried when we have the shit coins popping up and people resorting to pump and dumps to make money 🙂 that’s usually not a great sign for the markets as speculative trades really heat up.
That’s just my opinion of course, so only time will tell what happens. Now am I going to sell my entire stake at some point and try to buy it all back in? No, I don’t try to time the market that much because I would rather manage my exposure to crypto with % instead of getting in and out of the market. Just like the stock market, time in the market rewards investors because I still believe crypto will continue to grow and be a bigger part of our future.