Hey Guys,
I have a lump sum of money I have been saving for a deposit on a house and having done a lot of research on the future of BTC and considering things like the rise of property costs in the UK (London) with the inflation crisis - I've worked up a long term investment strategy using these funds (influenced from various sources online) that I think makes the most sense, as opposed to putting down a smallish down payment on a house and locking myself into a life-long mortgage / or investing in any other asset.
In my opinion, the opportunity cost of missing out on BTC as an investment in the stage we are at and with it's growth prospects far out weights the benefits of using this money for any other form of investment I can think of, including a house deposit in the current market.
I would love to hear any constructive criticism on this approach and if anything I might be over-looking here besides the obvious, negligent risks like "it could go to zero". TIA.
Strategy: Buy And Hold
How: Buy Bitcoin and keep the asset stored away in cold storage for it to appreciate naturally over the course of 5 - 8 years.
Why: Bitcoin’s upward trajectory since its inception and future growth potential as a world class digital asset revolutionising the 21st century economic system & hedging against the downfall of fiat and the inflation crisis.
Goal: Input as much fiat (depreciating asset) into bitcoin (appreciating asset) as possible to become a WHOLE COINER.
Pros:
Offers a way to buy bitcoin / reach ownership of a whole coin — without trying to time the market. In the long run, Bitcoin’s performance over the last decade was unmatched, this strategy allows maximum reward on investment efforts looking into the long-term future.
Simplicity: buy and hold without pressure, easy to do and removing emotion with long term objectives in mind.
Long term strategy hedges against volatility in the short-term & any short-term fluctuations in price.
Profit big when 1 coin reaches ATH’s (100K+, conservative estimate)
Cons***:
Bitcoin market price is constantly moving with high volatility. There is a risk.
If you decide to buy and hold Bitcoin at a certain price point, the price can drop significantly from there and you can lose big on your investment (if you sell).
Buying Bitcoin only is not a diversified strategy.
*DCA smaller amounts over a longer period according to the guidelines below to make these cons obsolete. Bitcoin is the blue chip ‘digital gold’ asset and diversification into other crypto projects/assets with this strategy could be seen as riskier. The goal is to reach financial freedom in the long term by becoming a WHOLE coiner with this strategy (not diversifying into various crypto projects).
Buy Bitcoin (DCA in over-time with the guidelines below):
When buying bitcoin, I’ll use Coinbase Pro, as this exchange offers low purchase fees. From there I can move into a cold storage device.
I’ll dollar cost average into bitcoin using my allocated funds over time when the buying opportunity is optimal. Key points and timings to consider buying bitcoin are:
2 Year Moving Average:
https://www.lookintobitcoin.com/charts/bitcoin-investor-tool/
Indicator Overview: The 2-Year MA Multiplier is a bitcoin chart intended to be used as a long-term investment tool. It highlights periods where buying or selling Bitcoin during those times would have produced outsized returns. To do this, it uses a moving average (MA) line, the 2yr MA, and also a multiplication of that moving average line, 2yr MA x5. Buying Bitcoin when price drops below the 2yr MA (green line) has historically generated outsized returns.
Why This Happens: As Bitcoin is adopted, it moves through market cycles. These are created by periods where market participants are over-excited causing the price to over-extend, and periods where they are overly pessimistic where the price over-contracts. Identifying and understanding these periods can be beneficial to the long term investor. This tool is a simple and effective way to highlight those periods.
Bitcoin Price Prediction Using This Tool: The Bitcoin Investor Tool can be used to indicate whether the price of Bitcoin today is at levels that are historically low (in the green zone) or high (in the red zone) or neutral (between the green and red zones). So, it is a useful tool for Bitcoin price prediction as investors can understand on a historically relative basis whether $BTC is currently over or undervalued. This can be helpful when forecasting the price of Bitcoin.
WHEN TO BUY BTC:
When price is below 2 Year Moving Average line:
E.g:
2. The Puell Year Muliple:
https://www.lookintobitcoin.com/charts/puell-multiple/
Indicator Overview: This metric looks at the supply side of Bitcoin's economy - bitcoin miners and their revenue. It explores market cycles from a mining revenue perspective. Bitcoin miners are sometimes referred to as compulsory sellers due to their need to cover fixed costs of mining hardware in a market where price is extremely volatile. The revenue they generate can therefore influence price over time.
How It Can Be Used: There are periods of time where the value of bitcoins being mined and entering the ecosystem is too great or too little relative to historical norms. Understanding these periods of time can be beneficial to the strategic Bitcoin investor. The chart highlights periods where the value of Bitcoin's issued on a daily basis has historically been extremely low (Puell Multiple entering green box), which produced outsized returns for Bitcoin investors who bought Bitcoin here. It also shows periods where the daily issuance value was extremely high (Puell Multiple entering red box), providing advantageous profit-taking for Bitcoin investors who sold here.
Bitcoin Price Prediction Using This Tool: The Puell Multiple uses the upper red band on the chart to show when miner revenues in USD terms are significantly higher than historical norms (in this case the 365-day moving average). Over the majority of Bitcoins’ existence, these periods have been when the price of $BTC has also reached its major highs. So, the Puell Multiple can be a useful Bitcoin forecasting tool to identify based on this metric whether price is too high and needs to drop (when the indicator is in the red zone), or whether it is too low and may need to bounce (indicator is in the green zone)
WHEN TO BUY BTC:
When Puell Year Multiple is below 0.5
E.g:
3. Fear and Greed Index
https://www.lookintobitcoin.com/charts/bitcoin-fear-and-greed-index/
What Is The Fear And Greed Index? The Fear and Greed Index is a tool that helps investors and traders analyze the Bitcoin and Crypto market from a sentiment perspective. It identifies the extent to which the market is becoming overly fearful or overly greedy. The idea is that when the market is generally overly fearful, it may indicate that Bitcoin is cheap/undervalued at that time and could present a good buying opportunity. The reverse also applies, so when the Fear and Greed Index is signaling market participants are extremely greedy, it may indicate the price of Bitcoin is too high above its intrinsic value and it could be a good time to sell.
Why Is The Fear And Greed Index Useful For Investors And Traders? Understanding the scores from the Index could present an opportunity to the astute investor to buy when the market is overly fearful and sell when the market is extremely greedy. Thereby potentially improving their investment decisions.
How To Use Fear And Greed Index To Understand Market Sentiments: The Fear and Greed Index is on a simple 0 to 100 scale and color-coded accordingly where 0 is red and 100 is green. When the score is red and close to zero this signals extreme fear and could indicate that many Bitcoin ($BTC) and crypto investors are too concerned about the price dropping further. At this point in time crypto fear is high and investors may not be thinking rationally. When the score is green and close to 100 this signals extreme greed and could indicate that many investors of Bitcoin ($BTC) and crypto are too excited about the prices rising a lot further in the future.
WHEN TO BUY BTC:
When Fear and Greed Index is below 20
E.g:
Sell Bitcoin (not for at least 4 - 5 years):
If necessary (considering a long term hold as not to sell the greatest most appreciating asset to own), to sell in order to buy other assets like real estate, consider the below times to sell (opposite to the above buying strategy).
When price is above 2 Year Moving Average x5 (red zone)
When Puell Year Multiple is above 4.0 (red zone)
When Fear and Greed Index is above 75
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