The volatility of the price of Bitcoin is known to all. I would even go a step further by saying that the price of Bitcoin is characterized by its extreme volatility. I think it’s important to remember, because the recent big drop we’ve just experienced in the Bitcoin market is mainly due to new arrivals in the ecosystem of the queen of cryptocurrencies. Different analyzes of the peak of transactions that we witnessed on March 12, 2020 clearly show that the bitcoins that were sold were mostly sold by addresses that had held them for less than a year.
BTC mostly released by “weak hands”
A majority of the people who sold their bitcoins suddenly on March 12, 2020 had therefore probably bought them the second half of 2019, by the time its price had risen above $ 10K. Bitcoin’s price even briefly exceeded $ 13,000 in June 2019.
These people who had bought Bitcoins above $ 8K therefore suddenly made the decision to capitulate when the price of Bitcoin fell by more than 50% on March 12, 2020.
Some even decide to sell their Bitcoins well below the market price as we saw at a time on Coinbase where the gap in the price of Bitcoin with other platforms has peaked. So while the average price of Bitcoin was still $ 4.4K on other platforms, people in total panic sold their Bitcoins around $ 3.8K.
All of this shows that managing emotions is an essential key when making a winning investment in life.
This unfortunate episode is also there to remind us that the extreme volatility of Bitcoin can be your best ally, but also your worst enemy. In what follows, I will come back with you on the strategy to adopt to make this volatility your best ally.
Bitcoin price volatility is a necessary parameter
The first thing to understand is that the volatility of the price of Bitcoin is an assumed choice. Bitcoin was designed to work permanently. Transactions can be completed 365 days a year, 7 days a week and 24 hours a day.
Whatever happens, Bitcoin continues to add transaction blocks to its Blockchain.
Bitcoin belongs to everyone, and therefore has no leader who can make arbitrary decisions to influence its operation.
As such, Bitcoin is the the only real free market in the world.
Contrary to Wall Street which will suspend trading as soon as the market loses more than 7% on the same day, Bitcoin will continue to function whether its price loses 10% or 50%.
Bitcoin leaves it up to its users to decide the break-even point for its price.
When Bitcoin loses 60 billion cap in a few hours like it did on March 12, 2020, no Bitcoiner is asking for bailout or outside help.
When Wall Street loses 30% as has been the case for about a month, all traders are calling for Federal Reserve for a massive plan to support the American economy.
The Federal Reserve ends always give in because it is the guarantor of this system of last resort, which only benefits a minority of people.
The solutions generally consist in using the monetary stimulus to always inject more cash. However, it seems to work less and less as we can see today.
For their part, Bitcoiners accepted this sharp drop in the price of Bitcoin without being afraid. The rebound that followed allowed the price of Bitcoin to drop above $ 6K.
Its current price therefore really represents what its users are willing to pay to get Bitcoin.
You have to believe in Bitcoin before buying it
The people who buy Bitcoin when its price exceeds $ 10K unfortunately do it too often because they follow a feeling FOMO (Fear of Missing Out) which develops as soon as its price exceeds this psychological threshold.
In fact, they own Bitcoin even though they don’t believe in the revolution that Bitcoin is building every day for the future.
Owning Bitcoin without having understood how it works and its objectives is the most risky in my opinion.
This then gives people who capitulate when the price of Bitcoin drops sharply as it did on March 12, 2020. In the past, we had already experienced the same situation in 2018 during the very strong bear market that had affected the price of Bitcoin.
Overall, people who buy Bitcoin without understanding how it works are most likely to lose money with Bitcoin.
People who really understand Bitcoin become HODLERS no matter what.
Believing Actually in Bitcoin is what will keep you from making bad choices guided only by your emotions when Bitcoin price volatility hits.
In times of high volatility in Bitcoin, HODLERS rely on fundamentals Bitcoin. And these fundamentals remain excellent.
With Bitcoin, you have to think long term
Once you understand how Bitcoin works, you will have two options in my opinion:
- Choose from totally believe in the Bitcoin revolution.
- Choose from doubt thinking that Bitcoin can never be an alternative to the current monetary and financial system.
Whatever happens, your options are limited to these two choices.
Some believe a little bitcoin to hear them, but they hesitate. These people fall into the second category.
If you doubt Bitcoin, the wisest thing for you is not to buy it. This will save you from losing money by giving in to your emotions.
Not everyone has the ability to be a Bitcoiner, and to cope with such price volatility. If you are not able to do so, you are in your most absolute right. However, stay away from Bitcoin for the time being.
If you believe in Bitcoin, you need to take action.
People who fundamentally believe in Bitcoin become Bitcoiners who understand that the road to Bitcoin’s revolution is long.
Like all great successes, that of Bitcoin will not happen overnight. It will take time, a lot of time even.
By engaging in Bitcoin, you simply choose to bet in the long term.
Having this in mind will allow you to avoid focusing on the short term with Bitcoin. When its price drops sharply, or rises sharply, you will be able to control your emotions.
If Bitcoin rises or falls sharply, keep a cool head
The emotion control is the second key that will allow you to have a winning strategy with Bitcoin. This famous strategy that will make the volatility of Bitcoin your best ally.
When Bitcoin sees its price soar or drop sharply, stay calm.
You know that Bitcoin, by its youth, is subject to these strong variations. It’s always fun to see Bitcoin exceed $ 10K or $ 15K, but its ambitious targets are for the long term.
So continue your life without getting carried away by making the mistake of selling your Bitcoins bought for $ 5K.
be patient by continuing to really believe in Bitcoin. The latter always rewards those who really believe in him sooner or later. The longer you wait, the greater the reward.
When Bitcoin drops sharply as it did on March 12, 2020, step back.
You will be able to see the whole picture. The fundamentals of Bitcoin remain excellent, and it is only a matter of time before all those disappointed with the current system join the ranks of Bitcoiners.
In such moments of panic and fear, you must choose to be greedy.
Be greedy means seeing in Bitcoin at $ 4K or $ 5K a opportunity unique to buy more. Again, if you don’t really believe in Bitcoin, you won’t be able to do this.
Only Bitcoiners are capable of this because they are betting on the future success of Bitcoin. A $ 5K Bitcoin does not scare them, and it is precisely the best strategy for its volatility to be a formidable ally rather than an enemy.
The volatility of Bitcoin is known to everyone, but as soon as its price exceeds $ 10K, many people forget this basic truth. They then buy Bitcoins without really understanding how it works and its ambitious goals.
These people are unfortunately the first to pay the high price when the price of Bitcoin fluctuates sharply downward, because they tend to capitulate very quickly.
Again, this is an essential lesson that recent events remind us of. To make Bitcoin volatility your best ally, you absolutely have to believe in it. This total belief will allow you to keep a cool head when its volatility is at its peak.
You will then be able to see this as an opportunity, and you will be able to take full advantage of it.
A developer by training, I discovered Bitcoin in 2014 but I did not immediately understand the importance it could have for the world of tomorrow. I got into it more deeply from the start of 2017 and since then I haven’t given up on the business.
Passionate about Bitcoin and the new system it is trying to build for the future, I decided to participate in its evangelism at my modest level by writing on Bitcoin, Blockchain and crypto currencies on different supports.
It is with pleasure that I publish some of my texts in French on The Coin Tribune.
I also write a lot about personal development and self-improvement.
Do not hesitate to exchange with me via social networks or in comments on my articles if you have questions about my articles.