In the long run, Bitcoin goes up, trying to trade it is often a fool's errand

Here we are, sitting at $31k, which is roughly $11k off of the previous all time highs seen a little over two weeks ago.

Anyone who sold at $42k or anywhere up there is feeling pretty good about things, especially if they got back in on that brief dip below $30k.

However, there are many out there wondering if the play right now is to sell bitcoin here at $31k and try and buy it back around $20k, which was the previous all time high and would likely act as tremendous support should the price get back to that level.

Unpopular opinion - Even if that move played out exactly like I described above, where you sell it here and buy it back at $20k, it's still probably not the right move.

But how can that be @jrcornel? How can not selling now and buying it back $11k lower be the right move, you might be wondering...

Well, the answer to that is quite simple...

The market rarely, if ever, does exactly what you expect it to.

The odds of bitcoin falling from here to exactly $20k and then turning around and going on to make new highs from there is extremely low.

What happens if you sell now at $31k, bitcoin drops like you expected, but instead of getting all the way to $20k, it stops around $22k and then goes on to make new highs from there?

That means you missed out on new highs, which would be over $20k in gains (from that $22k low) because you were dinking around over $2k lower to the downside.

Do you see how the risk/reward of such a strategy starts to look pretty silly pretty quickly?

Then when you factor in the fact that not one time did bitcoin pull back more than 38% during it's previous post halving bull market (a drop to $20k from $42k would represent a 52% drop), it starts to look even more silly.

Bitcoin truly is a different beast.

Ok ok, so @jrcornel, if I shouldn't sell now and lock in some gains how to I benefit from the zigs and the zags along the way?

That is a great question and one that I don't have a great answer for except to point out what I like to do.

For me, I tend to keep a core position of bitcoin that I don't plan on selling unless the price gets to some really crazy levels, which for this cycle, would be something well north of $100k.

And then I have some other bitcoin on the side that I like to try and trade with. The bitcoin that I try and trade with I sell a little when things get overbought and buy back when they get oversold.

Usually I do pretty well with the trading portion of my holdings, but full disclosure, I now have less bitcoin that I started 2020 with due to some missteps during the recent bull market.

I thought we'd pullback some after breaking $20k, which we didn't really see much of a pullback until significantly higher.

The bitcoin that I sold when things first got overbought and then bought back when it got oversold is now less than where I started. Not a good way to make money in a bull market.

Sure, this is just one tiny example of poorly timed trades, but the overall theme is likely to be present with most people on a long enough time frame.

You are likely to do better holding through the ups and downs as the price continues to go higher over time, at least that is what it has done ever since it was invented.

Now, this only makes sense if you believe bitcoin is going to continue to go up over time, which again is what it has done ever since it was created, but if you believe that bitcoin is going to die in the not too distant future due to regulation, replacement, or something else that kills it, well then be my guest and try to get all you can out of it while you can.

However, it's hard to price in unexpected events when making an investing or trading plan, which is where position sizing comes into play, IE only putting in whatever amount of money you are comfortable investing.

Once we get past the position sizing aspect, all we really have to go on is past performance, and past performance indicates we likely have tremendous gains in our future.

If that is indeed the case, missing out on those gains will end being much more costly than not timing the exact bottoms or trading in and out of every zig and zag along the way.

Stay informed my friends.

Image Source:

https://medium.com/swlh/a-cryptocurrency-lesson-for-wall-st-traders-when-to-hodl-and-when-to-sodl-785e9416036f

-Doc