Time to Buy Bitcoin For Cheap Long-Time Trades?
Last year, Bitcoin received nearly $ 20,000 – everywhere was reading about the new digital (money) era and predicting swift price increases of up to $ 100,000.
If you look at the latest news, you will find that almost exclusively negative reports are made about Crypto-currencies like Bitcoin. What happened to similar developments in the past? And should traders really keep their fingers off the digital currency, or can investment be worthwhile?
Current reports are reminiscent of the 2008 financial crisis
On closer inspection, it can be seen that news – and public opinion in general – is often “pro-cyclical”: when prices are high, it is advised to continue buying. On the other hand, it is recommended to sell in falling markets.
How wrong this approach is, for example during the financial crisis in 2008 showed: At that time, the US Dow Jones index has fallen below 7,000 points. Even at this time, the media reported only negatively on the stock markets. Overall, the reporting from then strongly resembles the messages that can be read at the moment about the Bitcoin.
Instead of falling further, however, the Dow Jones index has risen massively over the last few years, reaching almost 27,000 points last year. Those who went long in the financial crisis have been able to make a lot of money to this day. But the question is: “How do you know that a market has really reached its low point?” For the Dow Jones index, for example, could have dropped even further to 6,000 points.
Importance of the chart technique – analyze developments and recognize trends
At this point, charting comes into play: if you analyze the chart, you will find that an uptrend always consists of two components: the movement phase and the subsequent correction phase. Newcomers to trading often tend to buy in already-advanced stages of movement, supported by news and public opinion.
So, to come back to our Bitcoin example, it would be like choosing the $ 20,000 price to go long now. The experienced traders do not buy at these high points. Instead, you are patient and wait for the correction phase. Because once the price has fallen far enough, you will get much cheaper entries for profitable trades.
So the Bitcoin is currently in an upward trend. However, the virtual currency has already undergone a strong correction. For a trader who thinks anticyclically, there are very good opportunities for long trades at the moment. Where exactly one should get in, results in turn from the chart technique. Because there are many tools available that can help traders to better analyze the chart.
Fundamental data speaks for digital currencies like Bitcoin
As usual, the chart technique is only one side of the coin when trading. Just as important or even more important, according to experience, are the fundamental data. After all, they ultimately decide whether a concept or a business idea can succeed in the long term, which will also be reflected in corresponding price increases. So what are the competitive advantages of digital currencies like Bitcoin?
In order to find an answer to this question, it is a good idea to take a closer look at the Blockchain technology on which Bitcoin is based. So you can imagine the Blockchain as a huge database in which the information is stored in individual, interconnected blocks. The special feature now is that the information can not be subsequently changed.
Therefore, the blockchain is also very well suited as a basis for digital currencies. However, there are many more applications. Since it is in principle a database, it can also be used by film producers or video game manufacturers, for example, in order to protect and distribute content by copyright. This market alone is worth billions – and this example illustrates the great potential in digital currencies such as Bitcoin.
In addition, the limited amount of bitcoins means that it can not lead to a devaluation of the money. With “conventional” money, however, a contrary development is currently being observed. To support the economy or the individual countries, the central banks print money, which will lead to inflation and thus depreciation. Due to the aforementioned advantages of digital currencies such as Bitcoin, price increases are therefore also to be expected from a fundamental perspective.
Twitter boss continues to trust the Bitcoin
Even Twitter boss Jack Dorsey has recently stressed again that he still considers the Bitcoin for the future of money. It is also fitting that there are now even blockchain-based crypto-currencies that grant loans on the basis of crypto coins. It is therefore already foreseeable that more and more functions and services, which are still provided by banks today, can be realized in the future using crypto-currencies.
These offer the advantage that they work cheap, safe and fast. It is also conceivable that shares based on the blockchain in the future, for example, can distribute dividends and exercise voting rights. In this case, you will no longer need a broker for these tasks. But until that happens, it still makes sense to trade crypto-currencies as a CFD with a broker.
Do not let emotions guide you when trading
Even though the current reports are predominantly negative in contrast to last year, it is important to keep calm and not let the media drive you crazy. The past has shown that it can definitely go uphill again. Of course, traders should always stay up to date and follow news, but always do their own analysis. Not infrequently, the most profitable trading opportunities arise when the “majority” is afraid and can be guided by emotions, so rather rely on the gut feeling, instead of analyzing the chart with the help of a good Day trading software, Should the Bitcoin actually reach the $ 100,000 mark in the future, many traders are likely to resent not getting in on the current low valuations.