Long-time readers are familiar with the story of my friend Jordan.
He made the mistake of buying too much bitcoin (BTC) in 2017 and couldn’t hold through the volatility.
That year, he bought bitcoin at $1,250, $2,800, $7,500 and $14,000. That was an average cost of $6,387.
If he just held on that year, he would have tripled his money.
However, if held over the past 6 years, he would be up over 1000%!
But here’s the crazy part: He’s down on his bitcoin investments!
That’s right — even with an average cost significantly below bitcoin’s current price, Jordan still managed to lose money … in an asset that skyrocketed 5,000% since he first started buying.
Now you might be wondering how this is possible.
It’s possible because he let volatility shake him out of his positions. He gets out at exactly the wrong times, when if he had just listened to the advice I’m about to tell you today …. he’d be up big over the past few years!
Understanding the Flag Pattern
Most people don’t realize that not sticking to a plan has eaten into many investors’ crypto profits.
Any casual observer would think crypto investors are raking it in!
All they had to do was buy some bitcoin at any point in the last decade, hold on to it and cash out.
However, if you look past the staggering returns, you’ll notice that bitcoin is one of the most volatile assets in history.
Take a look at some of these spectacular bitcoin peak-to-trough drawdowns in 2017:
January 2018: -71%
December: -42%
November: -28%
September: -39%
July: -36%
May: -25%
March: -24%
January: -35%
During bitcoin’s 20X rally in 2017, there were seven drops of 20% or more. And four of them saw the price crash by 30%!
This volatility is what causes some investors, like Jordan, to miss out on massive profits.
Jordan kept repeating the same mistake: He would chase the market after a bullish run and then dump his holdings in panic a few weeks later when the reversal occurred.
This same pattern has occurred this year, albeit with less volatility.
Here’s a chart of bitcoin in 2024:
You can see we had that 85% rally from the post-ETF approval lows in February to the $73,709 high just before the April halving event.
Since then bitcoin has traded in a classic flag pattern, moving sideways between $50,000 and $70,000.
In that timeframe, there have been four drops of around 20%. It’s still not an easy asset to hold!
And while that range might not look like much, there is a battle happening every day where shorter-term investors are selling their bitcoin to investors with longer time horizons.
Moreover, flag patterns are like a coiled spring — once bitcoin breaks out in any direction, the move will be rapid and violent.
The good news is it now looks like bitcoin is breaking out to the upside.
I believe this is the beginning of the move to take us to $150,000 in the next year as institutions continue to embrace bitcoin as a new asset class and a hedge against fiat currency.
And just like these big breakouts in the past, it won’t be in a straight line!
So make sure you have a position size you’re comfortable holding through all the volatility.
Lastly, whenever bitcoin breaks out, there is more money to be made in smaller, lesser-known cryptos.
In 2020, while bitcoin rallied 1,100%, readers had the chance to grab 1,934%, 3,981%, and 18,325% profits.
Until next time,
Ian King
Editor, Strategic Fortunes