Bitcoin is at All-Time Highs – What Does It Mean?

Buying Bitcoin right now - reasonable or crazy? Here are some safety rules and scenarios to help the decision.

Bitcoin was at 8, 9, 10, $11,000 in just days, if not hours. Since then, it moved back to $9,000 and then back. But the question is: when is the good moment to jump in and own some Bitcoins? There are many glib answers. One is that the best moment was back in 2011, and the next best moment is now.

The other rule-of-thumb is to ‘buy the dip’, but what is the dip? Perhaps the best answer is to be prepared for anything, including the nerve-wracking 20 percent dip right after you bought in. And being prepared for anything also means not over-investing. Hindsight is a terrible companion, and it cannot predict the future, so be careful with pouring unaffordable funds in Bitcoin unless you can bear to watch the deep losses.

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Bitcoin: Possible Scenarios

One possible scenario is that we are in a time warp and it is 2013 all over again. An unknown event, bigger than any other loss or technical snarl we’ve been through, causes investors to throw in the towel and dump Bitcoin, regretting their decision. Bitcoin returns to a niche asset or is wiped out completely, back to being a hobbyist tool and a coin for purchasing fancy armor and weapons in the virtual world of your choice.

The other scenario is that Bitcoin survives as a strong brand and makes serious claims on being an asset that can map the world economic development while serving as a means of payment for large purchases. Estate, businesses and other large-scale assets are traded in Bitcoin, whether with a legal blessing or under the radar, while lesser coins serve other sectors of the economy and smaller communities. Bitcoin does not have a dollar value but may buy you valuable land in a third-world country.

The third possible scenario is that Bitcoin keeps its strength and becomes tame, growing at a slower pace, while adding mainstream investors. Pressures from bulls and bears move the price, but the enthusiasm of going to the moon is tempered.

Futures effect on the market and tame the volatility somehow. Growth is slower, and Bitcoin has taken a middle road between going parabolic and crashing completely. Other digital assets have their separate niches and go through a technological boom, developing much better payment systems, competing with Bitcoin in a more saturated market.

Fintech adopts cryptocurrencies as banking is democratized by the Internet, just like electronic outlets challenged mainstream media.

So Why Do You Need Bitcoin?

Bitcoin has made history and will always be remembered. Even if you cannot buy a house or a car directly, you can perhaps buy into interesting projects and altcoins.

Bitcoin is also a society. Sometimes not a very pleasant and good one, but this coin has managed to bring together people from all walks of life for a lively, if sometimes irreverent discussion. Bitcoin was the first idea to create the phenomenon of crypto cosmopolitanism, where differences in a few lines of code were far more contentious than age, location or creed.

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From Wall Street to Zimbabwe, from academics to anarchists and from artists to finance professionals, all have at least once asked themselves what task Bitcoin would serve. As a half-joke, Bitcoiners have asked- what if the real bubble is the US dollar and Bitcoin is the correction.

There may be some truth to this. The world economy has been encouraged to grow for nearly a decade since the crisis in 2008 by low interest rates, and is now awash with liquidity, cities growing more sparkly and new, free-flowing fiat money looking for more investment projects.

Bitcoin looks like the perfect opportunity to throw some money at and see if it sticks or grows. There is still enough institutional money to continue the flow for at least a while, especially if Bitcoin continues to show a honey badger attitude.

I’m In, Take My Money

If you have decided to get some Bitcoin, choose the safest possible way. Choose only the best and largest exchange available in your country or the best international exchange you can access. Buy the coins and immediately move them to a wallet where you own the private key.

Never share or post the private key or private seed. Once you make sure everything is set up, buy that first fraction of a Bitcoin, or a whole one. How about $100? Or $1,000? Whatever you are comfortable with- imagine you are paying this for a learning experience.

How much would you pay for a crash course in investing, markets and the economy? How much would you pay for a weekend of mountain climbing or white-rafting thrills? Throw that into Bitcoin, and the thrill would be guaranteed.

But, isn’t Bitcoin a Pyramid?

The Economist has noted that Bitcoin’s price rise somehow depends on “who is the greater fool” ready to fork up the cash and get the hot potato. Joseph Stiglitz, the Nobel Laureate in Economics, has noted that the rise in the price of Bitcoin right now is based on the expectation that it is somehow destined to reach $1 million a piece, and buyers are not paying for current utility but for future expectations.

However, the longer Bitcoin survives, the better it looks. One day, the coins may not be just a hot potato, but a carrier of value and no one would be the fool in exchanging them for another asset.

Right now, Bitcoin also has a strong culture of ‘HOLD’ and is actually NOT seeking the next wave of buyers. Perhaps the biggest “whales” are expecting their ownership of Bitcoin would give them a much larger economic or even political clout, and do not look for immediate results, but for future returns and influence.

Will your Bitcoin investment go to the moon tomorrow? Certainly not. Will it change the way you think? It certainly will.

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