I sold Bitcoin cos I'm so bullish on it!

At the beginning of October I was having a conversation with Max Keiser, well-known financial commentator and founder of Crowdfunding platform StartJoin, about the recent plateau in the price of Bitcoin. I was an early adopter of Bitcoin back in late 2009 and have experienced many new highs and lows along the way. Thus far 2015 was turning out to be a rather boring when it came to the price of Bitcoin, in the first week of January the price was in the $250 range and by October 15th it was trading around $250.

Suddenly in a very Max Keiser-esque way (If you watch ‘The Keiser Report’ you know what that means!), “Bitcoin’s gonna double!! Soon!” was blurted out.  After inquiring why he felt this was likely, we began discussing the collapse in Chinese equities--which was then in full swing (Shanghai’s Composite Index had dropped over 30% and massive government intervention had failed to generate any significant uptick). Max pointed out that as Chinese investors were fleeing equities and with new capital controls being rolled out by the Government on a daily basis AND considering China has a robust Bitcoin infrastructure already in place, it was likely that Bitcoin was going to provide a medium for significant capital flight.




I decided that the logic seemed sound so I made my first real Bitcoin purchase of 2015. Well the hypothesis proved to be sound and Bitcoin went from my purchase price of about $246 to over $500 in less than 30 days. Oh, yes, happy days were here again--as far as the Bitcoin faithful were concerned! After having suffered through 18 months of declining prices, media bashing and talk of “the end of Bitcoin” (again), the community was jubilant, many were sure that THIS TIME we were going to the moon!




That’s when I began to get my sell orders ready. If there’s one thing that discourages me from a bullish sentiment its absolute fervor in the face of conflicting facts. Often when it comes to investments it is an emotional tie into the asset class that gets people into trouble. When it comes to assets, being a fair weather friend is usually the best advice. I found myself looking at Bitcoin during this period,  and once a 50% profit had been achieved, I began to ask myself is it likely that this run will see the price double?

There were some important factors to take into consideration when it came to discovering the answer, the first revolved around the question of what these Chinese investors would do with their Bitcoin once it had arrived offshore. Was it likely that they would retain these holdings in Bitcoin or was it more likely that once Bitcoin had fulfilled its purpose in getting the money offshore that they would liquidate these holdings and invest into assets, which have traditionally attracted conservative Chinese investors (property, currencies, sovereign bonds and US treasuries in particular).

Another group to consider were those people who had purchased Bitcoin in the last Bull Run that saw the crypto currency head above $1,200 and had been left “upside down” as the price corrected down to the low $200s. It would seem likely that these folks would jump at the opportunity to offload their Bitcoin at or above their purchase price.

To be perfectly honest, there was one point that helped me make the decision to sell and that was simply that I did not believe the Bitcoin infrastructure had matured to a level yet which would justify a price point support level above $450 for very long.

Now, before the Bitcoin faithful get too upset, let me state that I am incredibly bullish in the long term about Bitcoin. I believe that Blockchain technology will be the largest technology disruptor the world has seen since the emergence of the Internet. There are many signals that indicate that the future of Bitcoin is going to involve increased adoption worldwide and therefore a higher price (when priced in Fiat currency) in the future. One of the strongest of these indicators is the dramatic increase in daily transaction volumes.




As I write this, the Bitcoin’s dollar price has again been rising and is now above $370, I believe that the upcoming Federal Reserve December FOMC meeting is playing a role here (as it is with most other asset classes in the world!) and it wouldn’t surprise me to see the price drop once more if the FED opts to continue with its disastrous policy of zero interest rates.

However, regardless of continued fluctuations in the price of Bitcoin through the end of 2015 and on into 2016, there are a few things that are certain: Bitcoin adoption is going to continue to grow at a rapid pace, the volume of daily Bitcoin transactions will continue to grow, main stream financial entities will continue to recognize the power of Bitcoin and Blockchain technology and drive initiatives in that space. One factor that I believe will drive Bitcoin in the main stream will be the continued growth of Crowdfunding and the rapid adoption of the crypto community of this exciting FinTech innovation. This, along with the other reasons outlined above, form the bedrock for the reason why I am, despite the volatility in price and a continuous onslaught of negative media from the main stream media, more bullish on Bitcoin than ever!




About the Author

Karl Gray

Author & Editor

Karl has been investing in financial markets all over the world for the last 10 years. Forecasting both the commodities bull markets of the naughties and the rise of crypto currencies, Karl has a proven track record in identifying global trends.

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