Why You Always Buy The Top (and why you should)

X-posted on r/cryptocurrency, but might be even more relevant here.

Let's consider two different potential top buyers of BTC in 2017. The price was around $20k.

• Zoey Zealot buys anyway: "Bitcoin is the future, and $20k is a ridiculously low price. It's going to at least 500k when it displaces gold." She hodls forever, and she's up more than 100%.
• David Dipbuyer scoffs at the price: "Sure, BTC might be a great asset, but we're clearly in a bubble. I'm not buying at the top." Then BTC crashes. "Ah!" David Dipbuyer says. "I was right!"

But, the story doesn't end here. When does David Dipbuyer actually buy Bitcoin? The answer is probably not in 2017, or in 2018. David Dipbuyer sees the price continue to drop and simply thinks "whew, bullet dodged. Glad I didn't buy that bubble."

Bitcoin is a (Social) Network

Bitcoin, and other cryptocurrencies, are networks at their core. Digital networks, yes, but primarily social networks. They draw their value from the amount of people using them (less true for some other blockchain tech, so we'll primarily talk about Bitcoin here).

You hear about crypto via social connections - whether that's through social media or through in-person interactions. Those interactions are far more likely to happen during a bull run.

Here's the critical insight:

It is precisely the fact that the social network around Bitcoin exploding that creates the price spike.

The price spikes because so many people are talking about Bitcoin, and you heard about it for that exact same reason.

For almost every individual, if we were in a bear market, you wouldn't have heard about crypto. It wouldn't even be on your radar.

When David Dipbuyer Actually Buys

So David Dipbuyer pats himself on the back for two years while the BTC price continues to tank. Eventually, BTC leaves his everyday thoughts, and fades into the background.

By the time network effects bring it back to the forefront of his mind, it's probably already January/February of 2020, and the price is 30k, 50% higher than the previous top.

Even if he got lucky and heard about it in December, he probably saw that the price had already 8x'ed from 3k to 24k and thought "here we go again, another bubble."

Eventually, the price spikes to $42k, and then crashes down to $30k, and David Dipbuyer finally actually buys a dip... at a 50% mark-up from where Zoey Zealot bought the top in 2017.

Just Buy the Top and Hodl

Zoey Zealot didn't stop buying BTC in 2017.

She's been DCA'ing into BTC for the entire bear market. So not only does she own BTC purchased at $20k, on which she's made over 100% return, but she also bought at $10k, and even owns BTC purchased at below $10k, because she DCA'ed in her savings over the course of 2017-2020.

If you're new to crypto, you heard about it because of the bull run, and you're likely buying at the top. Given that, if you believe it's a good investment...

Buy anyway.

Because the next time it gets on your radar, the price is going to be higher.