I Refuse To Buy Bitcoin Now: 3 Reasons Why
Why I’m not buying Bitcoin, and what I’m doing instead.
I would have easily made over 300% of my investment in under a year if I had invested in Bitcoin at the start of 2020. In fact, between the time I started writing this article and where it’s trading now, Bitcoin has soared another $6,000 or another 15% in price.
But, I didn’t buy then and I have no plans to buy in now or in the near future. I readily acknowledge that I may easily miss out on the next parabolic move up, but that’s the reality of missing out on any big move. Whatever happens in the end, here are my top three reasons for not buying Bitcoin.
1. With Great Reward Comes Great Risk
For me, bitcoin has gone up too much, too fast. When anything hits all time highs, I start to get cautious about entering trades. As much as the increased volatility and volume provide rich opportunities, they can also pose dangerous risks.
Emotionally, I think I would get caught up in wondering if bitcoin will have another triple digit percentage gain or if it will eventually slump back down to the $8,000 mark. If I’m not clear headed in my trading plan, then I won’t be able to properly execute on it, and that’s extra risk I don’t need right now.
Bitcoin’s Trading History
As you can see in the chart above, the last time Bitcoin saw a similar scale rally was in 2017. After Bitcoin hit a peak around $20,000, it proceeded to fall for the next twelve months. In that time frame, buying at the top and selling at the bottom amounted to an 80% loss. It then took three years for Bitcoin to surpass its previous peak.
Unfortunately for me, I just don’t have it in me to buy something if there’s been a history of slumping and trading sideways for years at a time as it has done from 2018 to 2021.
2. The Obstacles in Bitcoin’s Future
I’m not a Bitcoin hater. I believe that the future will see increased usage of Bitcoin. Recent headline news about Tesla buying up $1.5 billion in bitcoin and MasterCard accepting cryptocurrency payment have brought the cryptocurrency a new level of legitimacy.
Bitcoin and other cryptocurrencies are based on blockchain technology, which provides a distributed and decentralized “bank” ledger that records all the transactions that take place. This makes it difficult (although not impossible) for law enforcement to infiltrate.
I think that increased adoption will result in increased regulation and further development of government infrastructure to address cryptocurrencies. I see many opportunities for another run up in Bitcoin’s price short term, but it won’t be pretty when entities come together to decide how to regulate cryptocurrencies.
Just this week, Janet Yellen noted that cryptocurrencies are “a growing problem” due to their alleged misuse. In late 2020, the founders of cryptocurrency exchange BitMEX were charged for “failing to implement required anti-money-laundering procedures.” I don’t doubt that cryptocurrencies as a whole will be able to overcome these challenges. I’m just not confident that this will happen soon enough for me to feel safe buying in.
4. Bitcoin Trades All the Time
This is definitely a personal reason. Currently, I exclusively trade stocks and options from the 9:00AM to 4:30PM EST trading window when the stock market is open. I like that once the stock market closes, I’m completely done for the day. This allows me to better focus on other activities since I can’t do anything to change my account after market hours.
I have a bad habit of wanting to check my account a lot during trading hours to see how my positions are going and if there are any new opportunities I can take advantage of. I know that entering into a position on Bitcoin would have me constantly tracking news and checking the price to see how my investment is going.
What I’m Doing Instead
While I’m missing out on Bitcoin, I’m watching publicly traded companies whose business involves cryptocurrencies. It feels less risky in my mind to trade stocks since those have standards and expectations that they are expected to meet on a regular basis.
Plus, many of these publicly traded companies allow for options trading, my preferred method of trading. It is possible to trade options with cryptocurrencies but it’s not mainstream on major trading platforms. If I can avoid it, I would rather not open another brokerage account so that’s not happening for now.
In the last couple months, I have been making short term bullish trades on two companies, Riot Blockchain (RIOT) and Marathon Patent Group (MARA). Both of these companies have benefited from bitcoin’s meteoric rise and focus on mining, a process that pays individuals to ensure the integrity of new cryptocurrency entering circulation.
There are many other companies that focus on cryptocurrencies, but I am also going to be watching for other applications of blockchain technology. There are many interesting applications for blockchain that don’t have to do with cryptocurrencies, and I believe that the future will have a larger emphasis on leveraging decentralized networks to improve upon humanity. I haven’t done enough research to provide any company names at this time, but this is a longer term investment that I am interested in making.
What Are Your Thoughts on Bitcoin?
Are you currently invested in Bitcoin or other cryptocurrencies? I would love to hear your thoughts, whether you agree or disagree with what I have to say here.
