How long can Bitcoin continue to rise? Here are 8 lessons about Bitcoin prices

Source: Please debate

Author: Cai Leilei

Regarding Bitcoin, since 2016, I have published:

"Understanding the History of Currency Development in One Article" (2016.4) "What the Hell Is Bitcoin" (2017.1)

"I heard you bought Bitcoin, let's see how you die" (2017.5)

"After Bitcoin reaches 30,000, how many coins do you have left?" (2017.8)

Why Everyone Should Buy Some Bitcoin (January 2018)

"The blockchain you look down on is a train that is too late" (2018.3)

"When should I sell my Bitcoin?" (May 2019)

…

(Some were lost due to the migration of the official account, but were copied by others on the Internet)

There are also countless articles that mention the relevant configuration of Bitcoin. For example, in the several articles in the [Art of Making Wealth] series about wealth configuration suggestions, there are suggestions for partial configuration of Bitcoin.

I started buying and mining Bitcoin and other digital currencies in 2013. The reason why I started issuing them in 2016 is because Qingbian was built in 2016.

I have experienced almost two rounds of bull and bear markets, and made $100,000 from $500. To outsiders, it seems like an unrepeatable process of getting rich quickly, but in fact, the process is far from that simple, and I am far from as rich as everyone imagines (this paragraph is not Elsey literature).

Today I would like to talk about the eight opinions on “holding Bitcoin” that I have summarized from my seven years of experience.

1. In the long run, the amount of money each person holds will inevitably decrease

Over the past 10 years, Bitcoin has been rising. Every time it goes from bull to bear, Bitcoin will fall by 80% to 90%. Then every time it goes from bear to bull, the maximum difference can reach 100 times. This means that in every bull-bear cycle, the peak of Bitcoin will move up 10 times.

Judging from the valuation of Bitcoin against legal tender, it is becoming increasingly difficult for ordinary people to afford 10 coins, which was unimaginable in the past, as we used to buy them “one by one”. I believe that this difficulty will become less and less discussed after one or two cycles, because everyone will discuss whether they can hold 1 coin.

Why is it said that the number of bitcoins held by each person is always decreasing?

Because the price of Bitcoin continues to rise, and the amplitude is huge, every time you are short of legal currency and try to sell it to do something, you will find that no matter what you do in the real world, the legal currency you earn cannot buy back the same amount of Bitcoin.

So there are indeed a few people who have become wealthy by relying on Bitcoin, but the coins they have are also decreasing.

Many years ago, I knew some people who had more than 5,000 coins, and some even had more than 10,000 coins. After the peak of the last cycle, such people have almost disappeared.

Why do I say that I didn’t get rich overnight?

Because even though I am a staunch coin hoarder, I also sold a certain amount of coins because I needed funds to start a business. Later I found that no matter how the entrepreneurial project was valued, I could never exchange those coins back.

So don’t think that those who entered the market early will become rich overnight. Holding on to your coins is almost impossible in the long run. If you don’t sell at 2x, will you sell at 10x? Will you sell at 50x or 100x? Will you sell at 200x or 500x? Everyone has a price in mind, which leads to the second point.

2. The average cost of Bitcoin holders is always close to the current price

Everyone has something he wants to do, and when the price reaches a point where he can do that thing, he will sell it.

Some people sell to buy luxury cars, some to buy luxury houses, some to start a business, and some to gain financial freedom. In short, they will definitely sell.

So in theory, the higher Bitcoin rises, the fewer coins with higher profit multiples there will be, and the smaller the impact on the total holding cost. Bitcoin trading volume has continued to increase over the past 10 years, so the cost of the largest amount of coins must be those closest to the current price.

You don't have to be jealous of those who entered this market many years ago and feel that "it is unfair to distribute wealth simply based on the time of entry." There is no need to do so. I have already said that it is impossible to keep coins in the long run. No one who entered early still has those coins that have increased tens of thousands of times, except Satoshi Nakamoto himself.

3. Bitcoin is the fastest-growing asset for ordinary people

In the past 7 years, I have never seen an asset appreciate faster than Bitcoin.

Everyone talks about how the real estate prices in Beijing, Shanghai, Guangzhou and Shenzhen have increased many times, and often envies those who "got on board" early on. I also have some real estate, but compared with the appreciation rate of the Bitcoin I have, it's nothing.

Some people say that if I could travel back in time, I would definitely buy a house in xx, buy stocks in xx, and buy Bitcoin in xx. That’s wrong. If you carry the memory of the times, you shouldn’t consider anything else if you have the option of Bitcoin.

Perhaps you might be talking about some pyramid schemes. Indeed, they may really appreciate very quickly in an instant, but first of all, the window period is short. After the rapid appreciation, it will collapse quickly. Something that cannot be held for a long time is destined that 99% of people will not buy or sell at that exact point; secondly, when it is high, since the market transaction volume is very small, what you earn is only book wealth. If you sell a part of it, the price will fall sharply, and you will not be able to escape the remaining part.

But Bitcoin is not like that. Its decade-long rise has given ordinary people enough time to enter the market, and no matter when they enter, as long as they do not operate, they will still make money today. And its size is also large enough. There are often people on the Internet who have never bought Bitcoin and say that they cannot sell it after buying it. Such people are very low, very low - Grayscale holds hundreds of thousands of bitcoins and is not afraid of not being able to sell them. It continues to buy them every day. It is really inappropriate for you who cannot afford half a coin to say that you can't sell it.

Bitcoin may not rise forever, and may even be finished tomorrow, but it is still the best investment product in the past 10 years, and it has the most friendly investment threshold for ordinary people. You have to buy at least a whole house, but you don’t even need to buy a whole Bitcoin.

4. Everyone should keep some Bitcoin

I can’t remember how many times over the years I have urged everyone to keep some Bitcoin.

If you have never bought it, you must buy some to try it out; if you have bought it before and plan to sell it, then keeping some at the bottom won’t affect your ability to cash out 99% of the coins, right? You can hold a few thousand dollars, so how much can you lose?

But if it goes up, there is no ceiling.

This kind of investment product has limited losses when it falls, but unlimited multiples when it rises, and its 10-year history has been proving this point. Why can't we allocate a little to it? If you like it, allocate more, if you are afraid, allocate less, but more or less, it should be the best target at one end of Taleb's barbell strategy, right?

Why do you keep ignoring it? Is it simply because you knew about it a long time ago but didn't hold it, so you can't give yourself an explanation for holding it at the current price, so you can only desperately hope that it will fall?

If your hope was useful, you would have been the richest man in the world long ago. This is irrational.

5. Bitcoin’s “vulgar price range” determines the ceiling of the cycle

The obscene price range is a word I invented.

There is a period of growth in games, and so does the price of Bitcoin. The period of growth is when the price is not disturbed. If no one disturbs it at this time, it means that the price will continue to rise for a period of time. Once the mainstream irrelevant media discovers Bitcoin and starts to report it, even though there will be several times of upward surge in a short period of time because a large amount of incremental cash will flow into the market, it is often only a few months away from the peak.

At first, it was 1,000 RMB per coin, and the media began to report it extensively; then, Bitcoin surpassed one ounce of gold and broke through the 10,000 RMB mark, and the media began to report it extensively; later, it broke through 10,000 US dollars, and the media began to report it extensively; now it has broken through 100,000 RMB, and the media are no longer surprised.

So if you ask me like the title says, how long can Bitcoin continue to rise?

That should be a long time away. When the mainstream media come out to take advantage of the hype, we have to count the days, because the mainstream media's extensive publicity of Bitcoin's wealth effect will lead to a large influx of incremental funds, and this influx of funds will push up Bitcoin prices, which will further become the material of the media, and then spread step by step to people who have no knowledge of Bitcoin, making them itchy and finally rushing into the market one day.

At this time, the price of Bitcoin will reach the peak of the cycle, because even newbies have entered the market, so no matter how much the media spreads it, it will be difficult for more people to enter the market with more money. The pressure to realize profits is greater than the support for purchases, so the bull market turns into a bear market.

This is the case for every cycle, and what determines the peak of Bitcoin prices in each cycle is "the price when mainstream media intervenes heavily." Usually, this price will almost collapse if it is multiplied by 3 to 4 times, and these multiples will be completed in a very short time.

6. Bear markets always last a little longer than you can handle

You never know how many years the bull and bear cycles of Bitcoin occur. Perhaps you will say that according to past practices and the halving cycle, it is once every four years. But once the rules are generally recognized, everyone will buy at the bottom or sell at the top before the rules come into effect. Smarter people will make decisions a little bit ahead of most people. What about being a little smarter... Everyone thinks they can be a little smarter until the rules disappear.

Those who are waiting for the bear market to turn into a bull market often have assets that have fallen from the bull market, that is, they are trapped. This is because there is not much trading volume in a bear market, and few people will buy during a falling market. Even if they do buy, they will be trapped first, and then add to their positions all the way, until they run out of bullets and find that the bear market has just reached the halfway point of the mountain.

This type of people are most likely to make the determination of "I will survive the entire bear market" and "I will just not move at worst, I don't believe that the price won't rise", but in fact they are in pain and helpless.

They feel that they can hold on for at least three years, but three years is neither long nor short. During this period, countless unexpected things will happen, and many new things will appear that will make you want to "sell them and change". When your willpower not to sell is exhausted, as soon as the price goes up a little bit, you will rush to sell everything, for fear that this is just a short-term rebound in the bear market.

So why is it that a bear market always lasts a little longer than you can bear? Why do the market makers always keep an eye on your stocks, so that when you buy, the stocks fall, and when you sell, the stocks rise? No one is watching you, it's just that your human nature is in tune with that of most people.

It is because you, like everyone else, have accumulated so much kinetic energy that you want to sell, and you have been longing for dawn for so many years that you are trying desperately to catch the ray of light before dawn. You are afraid that if you don’t catch it, even this ray of light will be gone, and you will miss the entire dawn perfectly.

So each time it's just "a little bit" longer than you can bear.

7. Bitcoin will no longer have 10-fold or 100-fold fluctuations one day

Some coin hodlers will say that holding Bitcoin is always right.

Indeed, from a historical perspective, this is not a problem, but it does not mean that it will be the case in the future.

The current market value of Bitcoin has exceeded 2 trillion yuan. Although this is not high for a borderless investment product, if the peak of the bull market in this cycle can really increase 10 times from the current level, it will be 20 trillion, which has surpassed gold.

I wonder if an asset of this size can increase by 10 or 100 times?

So I once said that this cycle may be the last time for ordinary people to participate in the "skyrocketing and plummeting of Bitcoin" for this reason.

Bitcoin will either die, the probability of which is extremely small now, or its size will truly reach the point where it becomes one of the assets that mainstream institutions can allocate. In that case, it will become an ordinary investment product and will no longer be a product at one end of the barbell strategy. If ordinary people want to take advantage of a positive black swan, they will have to find new targets.

8. The following 3 situations are worth selling your Bitcoin

Although history over the past 10 years shows that it is wrong to sell Bitcoin at any time, if a person holds an asset until death, even if the asset always rises, such holding is meaningless, not to mention that it will not always rise, which is completely impossible.

There are three situations where you should consider selling your Bitcoin:

1. Bitcoin’s size and popularity, either of which reaches the scale of traditional financial products first

The reason why Bitcoin's growth can reach this level is that it is small, so the incremental funds required to drive it are also small.

We have to understand this rule. When an asset rises, the number of people eager to buy is always greater than the number of people eager to sell. No matter what asset it is, the opposite is true when it falls. If the volume of an asset is 10 yuan, and the liquid transaction is 1 yuan, then many people rush in to buy. After a round of bidding, someone spends 10 yuan to buy the 1 yuan item. At this time, the entire asset volume becomes 100 yuan, and the assets held by everyone before have increased tenfold.

But what if the size of this asset is 10 trillion? The one trillion in liquid trading is 1 trillion. We regard this 1 trillion as 1 coin, which means that the bidders together need 10 trillion to increase everyone's assets 10 times. How many people would participate in the bidding? Everyone combined does not have that much money, so how can it be increased 10 times?

A few years ago, when A-shares were in a bull market, someone said that A-shares would reach 10,000 points. Do you know how big A-shares are? 10,000 points would require people all over the country to take out their money to invest in stocks.

So if the size of Bitcoin reaches the scale of traditional financial products, you can consider selling it. Or if its popularity rate approaches that of stocks, that’s about the same, because there will no longer be a “demographic dividend.”

2. Selling it can greatly improve your quality of life

If you originally lived in a small house with your parents, wife, and children, and selling your Bitcoins can allow you to move into a bigger house, drive a small car, and eat out without having to worry too much about the price, I think this is a good time to sell it.

People ultimately focus on life. Today you can improve your life but if you don't, I've said that when a bear market comes tomorrow, you will most likely not be able to survive the next bull market. By then, your entire mentality will collapse. The feeling of "I could have done it" but lost it will make you unbalanced in everything you do.

When the Bitcoin in your hand has increased many times, no matter how many times it increases after you sell it, when it falls in a bear market, it will most likely fall to your current range or even lower. The buying window in a bear market is several years. At that time, you can choose whether to continue or not according to your financial situation at that time, and whether to invest a little bit to play slowly.

3. Selling it can give you financial freedom

Financial freedom is another hurdle. If the interest earned from selling Bitcoin in the bank is enough to cover all family expenses for a year, and you can even have some extra money for investment, then you should be free first.

You can use the extra investment funds and money earned from work to slowly choose your future path, and do something meaningful while learning. The impact of this state on your mentality is priceless.

The above 8 points are my thoughts and experience summary on Bitcoin in the past 7 years. Some are my observations and some are my personal experiences. Four or five thousand words are a bit too much to read, and I hope it will be helpful to you.