Is it time to give up on Bitcoin?

Bitcoin has fallen more than 25% from its peak earlier this year. Is it time to flee before it collapses further?

Historically, September is the worst month of the year for trading. Worrying economic indicators increase the likelihood of a recession, and billions of dollars in leveraged longs are being liquidated. Hundreds of millions of dollars in "historic" outflows hit Bitcoin ETFs for several days in a row. Analysts warn that when Bitcoin trades at $54,000, it will fall to as low as $40,000. The same pundits who hyped up the Bitcoin bull run a few months ago now say there are no catalysts to push the price higher this year.

Fear is reaching higher levels, negatively impacting Bitcoin and the cryptocurrency market. Sentiment is so low that influencers have changed their titles from “get rich” to “get out”. No wonder the Fear and Greed Index is hovering at its lowest level this year.

If you think Bitcoin is bad, then you will definitely be miserable if you hold altcoins. Times like these make Bitcoin Maxis look like a genius, while altcoins are universally called “shitcoins”. Ethereum ETFs have already been declared a failure. Pump.fun has withdrawn millions of dollars in degen funds, with leveraged losses absorbing much of the rest. Multiple high-cap altcoins such as Dogecoin, Avalanche, Cardano, Chainlink, and Polkadot have given back their massive gains from earlier this year.

Why Skepticism Makes Sense

It’s understandable to be skeptical of Bitcoin and the broader cryptocurrency market these days. Wall Street was supposed to be unleashing a flood of capital, and Bitcoin luminaries such as Cathie Wood and Michael Saylor have thrown out their million-dollar predictions. The halving has already happened, and based on history (which always repeats itself unless it doesn’t), Bitcoin should be trading at or near its all-time high.

Presidential candidate Kamala Harris’ threats to raise taxes and manipulate prices suggest her team may not be friendly to the economy. Furthermore, the current administration (Kamala is Vice President) has engaged in a nothing short of predatory assault on the US cryptocurrency market, hacking crypto exchanges, NFT platforms, and other decentralized applications after suffering huge losses from Ripple and orchestrating a multi-billion dollar fraud by Sam Bankman-Fried and other cronies.

We all feel like we are getting poorer. Personal savings rates are near all-time lows, credit card balances are at all-time highs, and the government can’t seem to accurately report any economic data. Inflation is supposedly down, but it’s hard to know when you buy anything or pay a bill, and it seems like everything is going up.

As retail crypto investors, we face several problems:

We feel poorer because we are poorer.

We are used to getting hope from influencers and analysts, and now they are spreading fear because only greed or fear can get clicks and views.

Bitcoin is now approaching its last line of support before another major downturn.

Why Now Is Not the Time to Give Up on Bitcoin

I’ve written six paragraphs explaining why it’s smart not to buy or sell Bitcoin right now. Now, I’m going to explain why that thinking is short-sighted, wrong, and dangerous unless you’re a short-term thinker.

I could discuss how the number of Bitcoins on exchanges continues to decline, how Bitcoin is trading below the short-term holder realized price (a historically bullish indicator), or point to Michael Saylor’s massive Microstrategy purchase or Mr. 100’s continued accumulation of Bitcoin. I could also go into how the Crypto Fear and Greed Index has historically been a contrarian indicator, and how Donald Trump’s presidential victory brought massive capital inflows to risk assets.

In fact, I could highlight multiple other bullish data points and talking points to support why Bitcoin has great buying potential right now.

But I won't do that.

I'm going to make a simpler argument. The Fed is shifting direction. Below is the simplest and most accurate chart of when Bitcoin's price is accelerating. The blue bars indicate when the money supply of major economies (the United States, China, the European Union, and Japan) is increasing. You'll quickly notice that when the money supply is not increasing rapidly (the red circles), Bitcoin exhibits a sideways or falling pattern.

Meanwhile, when the printing presses start, the price of Bitcoin will rise sharply. After two years of shutting down the printing presses, the Federal Reserve may turn them back on, and other central banks will follow suit.

When money printing is in full swing, you will want to hold Bitcoin. This is because of Bitcoin's inherent deflationary structure. While an unlimited number of dollars, yen, euros, and yuan can be printed, the number of Bitcoins remains constant. Money printing leads to two things:

More fiat money flows into Bitcoin because it is (wrongly) labeled a risky asset.

More and more regular people are starting to realize that the current fiat monetary system is rigged and that Bitcoin can protect them from currency debasement.

Some Different Ways to Look at the Market

Sometimes when my portfolio isn’t doing as well as I’d like it to, I try to use metaphors to calm the nerves. Here are some alternative ways to think about the state of the Bitcoin and cryptocurrency markets today.

Imagine you’re heading out on vacation and you’re stuck in a traffic jam. You know the traffic will get better someday, but you’re not sure when. You wouldn’t cancel your trip and go home because of the traffic jam, would you?

What if you were betting on a sports team? The team you’re betting on has an 85% chance of winning. If the team you are betting on is trailing in the third quarter, do you bet on them to lose or cancel your bet on them? Or do you increase your bet based on your confidence that they will win?

Good things are hard to come by. If you want to build muscle, you have to rip off the old muscle. If you want to be the best at something, you have to face painful losses and have to overcome adversity. Holding Bitcoin is not always easy, but it will be extremely rewarding in the long run.

Key Takeaways

If you are scared, worried, or stressed about Bitcoin and the cryptocurrency market, it is completely understandable. As discussed, there are many reasons why you may feel this way, and our environment can influence our thoughts. Giving up on Bitcoin is what Wall Street and the Bitcoin moguls want you to do. Since they have so much wealth, a drop in Bitcoin price represents a buying opportunity.

If you are investing in Bitcoin for short-term profit, now may be the time to exit. It is important to understand “why” it makes sense to hold Bitcoin. If you are not familiar with the fundamental reasons to hold Bitcoin, it is easy to get spooked and exit the market prematurely.

On the other hand, if you recognize that as the money supply expands, the price of Bitcoin will also increase, and that we are entering a phase of money supply growth, then now may be a good time to load up or accumulate more of this scarce asset.

If you think it makes sense to hold Bitcoin now, please applaud. Or, if you don't, please share in the comments why it doesn't make sense to hold Bitcoin. Thank you for reading.

I own Bitcoin and a Bitcoin ETF. This information should not be considered investment advice. I am no more qualified to give financial advice than I am to win a hot dog contest. Digital assets such as cryptocurrencies and NFTs involve risks, so you should always perform due diligence before investing.