Review of three reserve fund increases

Overnight, Bitcoin (BTC) regained its position of $30,000. This is the 12th day that it has been trading sideways near $30,000.

The Eight Characters says to stick to fixed investment. Should we care whether we add positions at 28k, 30k or 32k? In fact, the difference of 2k is only about 7% of the cost difference.

If you really care about the big difference in costs, you have to look for and wait for that moment when "the streets are covered with blood" in a cycle of one year.

At this moment, even the most determined investors are resisting in their hearts to continue with their investments. Even the bravest investors who buy more when the market falls have run out of bullets and are unable to continue buying more when the market falls. Now is the time for a Jedi counterattack.

This is the time to borrow moderately from off-site reserve funds for assistance.

In the article "From Investment Novice to Financial Freedom" on August 21, 2021, it is written that the investment ratio of Bitcoin is best controlled at 10-20% of cash flow (for beginners), and no more than 50%. This means that you will leave as much as 90% or as little as 50% of cash on the sidelines. After deducting your daily expenses and other investments, the rest can be used as a reserve fund.

This reserve fund has at least two functions: one is emergency, such as when you suddenly encounter a change in life and need money; the other is to save the situation, such as when your Bitcoin price drops to the point where you need to fight back. The only hope is that these two situations will not happen at the same time. Although, our ancient wisdom tells us that "good fortune never comes alone, and misfortune never comes alone." Be in awe of the operation of the universe and be happy with the ordinary life.

When you are lucky enough in life, you will save some reserve funds for emergency use.

In the past few years, I have borrowed off-site reserve funds three times to support on-site position increases.

The first time was in February 2019. At that time, after a whole year of decline in 2018, the added positions retreated by nearly -50%.

In December 2018, as BSV hard forked from BCH again, Bitcoin plummeted to nearly $3,000. At that time, many people had already predicted that the price of Bitcoin would drop to the previous high of $1,000 in 2013.

In February 2019, Bitcoin showed a slight recovery, trading sideways in the range of $3,500-4,000.

Looking back now, the entire "depression area" lasted about four months, from November 2018 to April 2019.

In February, when I borrowed my own reserve funds to increase my holdings, the price was roughly 1/3 to the right of this depression.

My financial situation was actually very bad at the time. I was having a difficult time with my off-site cash flow, and it was still a big question whether this difficulty could be resolved in the short term.

But I just happened to have a little money on hand, so I invested all of my last "big money" - roughly equivalent to the amount of money I invested throughout 2018.

I have not yet repaid myself this money.

The second time was in March 2020. At that time, the market suffered a "312" crash, and my position income from 2018-2020 was once withdrawn to zero.

During the 312 crash and the market recovery in the following days, I used some of my reserve funds to increase my positions through OTC.

However, I was not able to buy at a price below $4,000 because near the lowest point, the trading was so intense that the exchange crashed and was unable to operate, and even the OTC was closed directly.

I didn’t enter the market until the market stabilized a bit. I added positions several times in the range of $5,000-7,000. The amount of funds added was about half of the first time.

This time, with the market crash, the future of many things suddenly became bleak. The situation outside the market also suddenly became serious. Coupled with the unclear outlook of the epidemic, people suddenly felt that eating to save their lives would become the number one problem.

This shows us that the synchronization of on-site and off-site transactions, rather than hedging, often limits our ability to use our reserve funds.

I also didn't repay myself for that money.

The third time was at the end of May 2021. Many friends who had just entered the market last year after hearing that the bull market had arrived should still remember last year’s “512”. Although I set a stop investment of $50,000 early on, the retracement to $30,000 still caused some losses to some of my high positions.

This time, the "depression zone" lasted for 2 months from the end of May to the end of July. I borrowed reserve funds at the beginning of the 1/3 to increase my position later. The amount of funds this time was a bit larger (a bull market always makes people feel that they are in good financial condition), about 150% of the first time - but compared with the price of Bitcoin, this amount of funds can only be exchanged for 1/6 of Bitcoin.

But this time was different from the first time. I did not add all the reserve funds at once. Instead, I split it into several parts and invested them in batches.

Since the normal fixed investment budget is mixed in, it is difficult to calculate the average cost of adding positions to this batch of reserve funds. However, after adding and adding, it rebounded in August, fell back in September, and surged in October, so the average increase in positions is estimated to be between 30,000 and 40,000 dollars or even 45,000 dollars.

In other words, if calculated based on the current price of $30,000, this money should be a paper loss.

However, I had some profits in the market in the past few months, and I used part of it to repay the reserve fund. So far, about 1/3 has been repaid.

I remember seeing a giant whale that made precise moves and increased its holdings at the end of 2018, on March 12, 2020, and on May 19, 2021. Unlike me, it remained silent at other times. I kept the eight-character formula at other times and borrowed reserve funds for support at these three time points.

Of course, the whale's move is cleaner and more efficient than mine. Unlike me, it does not increase its position in batches and drags its feet, so its buying point is much better than mine.

However, what I actually want to say is that grasping this kind of timing seems cool, but it may not be better than simply keeping the eight-character formula or even just insisting on fixed investment, at least not much better.

The first is that timing is not easy to grasp.

Moreover, looking at the period between "312" in 2020 and "519" in 2021, is it better to wait until "519" to add it all at once, or to make continuous fixed investments during the rising period?

The second is that when the time comes, the off-market financial situation may have deteriorated, and it may not be possible to borrow reserve funds easily, and psychologically, one may not dare to take action.

If you go all in, you will be stuck; if you go for a small amount, the price will go up and the cost will be raised. There is no solution.

The third is that the financial conditions in the OTC market tend to get better and better, so overall large funds are still invested in prices after the increase. This is the same frequency between the on-site and off-site markets in the macro cycle.

How to learn to hedge against such frequency synchronization may be a science or even an art.

No matter how you choose the time, you may not be able to gain any advantage in the market.